It's a given that business owners will want to have control over how and when they leave their business. Yet, 83% of the participants in PROFIT's Entrepreneurial Nation survey say they don't have a formal exit plan.
Having worked with thousands of exiting business owners, we at BDO know that most hope to exit through a voluntary sale during which they decide when to sell and to whom. This type of sale also has the greatest chance of maximizing the value received for the business.
The best way for business owners to achieve this goal is to prepare a formal plan for a voluntary sale to family or management— which is the exit strategy favoured by 49% of survey respondents. This plan typically involves a number of tactics, such as preparing the business by bringing in professional management advisors, creating an advisory board, updating accounting and financial systems, and writing a revised business plan. This "professionalization" of the business sets the stage for a successful internal management transition and, at the same time, accommodates a change in direction for a third-party sale should the opportunity arise.
While 60% of survey respondents say they plan to exit their business within the next 10 years, it is important to note that preparing for a voluntary sale can take five or more years. That means many business owners will be limiting their sale options the longer they put off creating, and executing, a formal transition plan.
By preparing your business for a voluntary internal sale, you can build a sustainable operation that will attract both internal and external buyers. At the same time, the process also will help you add to the bottom line today.
Grant Robinson, FCA, is a partner in the accounting and advisory firm BDO Canada LLP. Robinson leads the BDO SuccessCare Program, an internationally recognized client-centric process for addressing the transition of entrepreneur-owned businesses. For more information, visit www.bdo.ca/businesstransition.