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Entrepreneurship is alive and well in the United States of America, as is evident from the U.S. Census Bureau’s report that a whopping 5.4 million new business applications were filed last year (and that number is still growing). While there’s an excitement that comes with starting a business, within the world of entrepreneurship, I have seen what can happen when new founders and first-time entrepreneurs are ill-prepared to eventually sell their business — I know that I was.
With that in mind, I have some recommendations to share with future founders and entrepreneurs, and that is to always have an “exit strategy” built into the business plan from the very start. The day that you register an LLC is the day that you begin to chase the vision of the future, and having a well-baked plan to sell your business is a necessary evil when securing your financial success for the future. So, what might that look like? And what are some of the options available to you?
Be prepared for anything
The most well-known ways to sell a company include planning an Initial Public Offering (IPO), a merger or an acquisition. It can also look like selling your stake to a partner or investor, passing on the business to a trusted family member, or liquidating the business and ultimately filing for bankruptcy. Bootstrapping, working with outside investors, outsourcing and buyouts also come to mind. Preparing for any of these scenarios early on and revisiting your plan often is imperative to making the right kind of strategic growth decisions for yourself and your business.
So, from the time you begin drafting a business plan to your first conversation with legal entities, it’s important to be thorough with every piece of documentation. While it can be a tedious task to sell a business, going into those conversations with clear communication and a transparent process is the key.
Beyond considering the plans for the type of sale that you would like to pursue as you drive your company forward, it is also important to think about whether you even want to sell. Starting and building a business is a very rewarding endeavor for many entrepreneurs, but it is also very hard work, and once you have invested all that time, effort and capital into something, letting it go is not always the endgame. Therefore, it is good practice to review and possibly update your business plans and “check in” at least once a year, especially for younger companies.
Related: The Strategies I Used to Sell Two Business by the Time I was 45
There’s no shame in seeking counsel from others
I have seen businesses throw their weight towards vanity metrics or be dizzied by the capital they have received. Remembering to stay grounded and committed to making the right decisions for the business, not just for yourself, is important. Utilize your board members, and consider the insight of outside counsel, leverage the experience of your advisors, and tap into some support networks for further input and insights. There is nothing more valuable than entering a safe space where you can receive feedback on ideas for solving the big challenges in your business, and life, than with a peer network of advisors who truly have your best interests in mind.
Don’t forget to innovate
From my past experience in selling two businesses, knowing when to place reasonable constraints on your resources, whether that’s capital, people or products, can net a positive result, because those restraints can, in turn, spur creativity, innovation, discipline and focus, all of which will make the business healthier and stronger in the long run. Innovation in any form is critical to business growth, particularly as the speed of business cycles continues to increase, bringing that sale date ever closer for some entrepreneurs.
Related: Your Business and Its Value: How to Build, Grow, and Then Sell It
Knowing how you want to sell your business ultimately comes down to being able to define what success really means for you. The life of a founder post-sale is only as rich and fulfilling as the success for which you define it to be. I know that I once thought chasing the dollar signs was the end goal, but I very quickly learned it was about establishing a secure future for the company I was moving on from and so much more.
With nearly two decades of experience as an entrepreneur, CEO and founder, and with a few business sales under my belt, I have learned that starting early, being prepared, utilizing your trusted resources, and remaining true to yourself can assist in a successful sale of a business, whenever that may be. I wish I had known this when I was just starting out as an entrepreneur, and I hope it helps you to continue to make the right strategic decisions on behalf of yourself and your company.