Fact of business.
Every owner exits.
Exit planning is the preparation for the exit of an entrepreneur from his company to maximize the market value of the company via complete sale, public offering, merger, acquisition, or other ownership transition. You should not be planning how to exit on day one. This is when you feel that the business has exhausted its potential under your leadership.
Market prices for most businesses are generally a low single digit multiple of cash-flow – the pre-tax profit with owner’s earnings included. The unicorn’s (e.g companies priced at high multiples of sales) are generally fast growing, have novel offerings, or add massive value in terms of community or technology.
For the majority of owners, selling through a traditional business broker is the only option. Yet, 87% of small businesses listed for sale in the U.S. never sell at all? And the ones that do sell usually do so only after years on the market and at deeply discounted prices. We’ve seen many sell for less than one year of pre-tax profit.
And, for sales that do close, commissions, professional fees, liability payoffs, and of course capital gains taxes, leave the owner with very little cash at closing. It’s often more intelligent to just keep the business, hire a manager or sell to a competitor. Worse yet, three quarters of acquired companies fail after the acquisition, making the probability of a successful business exit less than 10% with traditional methods.
The best way to plan for an exit is to build the business to generate recurring revenue at solid margins. Looking to sell your business now? Sign up or get in touch and let our experts help you get the most value from your asset.