When should a business owner start thinking about planning their exit? Early! This is a high-stakes decision and should not be first contemplated when it is imminent.
We would suggest that the exit assessment and planning begin three years before the planned transiton. It could be compressed to 18 months, if the owner has already done preliminary work on this process. Step back and assess where the company is and where it might be before your planned exit.
With your mergers & acquisition advisor get an idea where the company fits in the marketplace, what the value range might be, and what the value drivers are.
Consult with your financial planner and get an idea how this will mesh with your personal financial plan, and as a team decide how to get where you want to be and what you want to do in your post-work life.
It is wise to start thinking about the business as a financial asset, not the emotional aspects. After all, others will view this as critical. The business is a financial asset, and likely the largest financial asset.
Owners who start early and plan the timetable and steps to get there simply have the most options.
Those options might be an internal sale, a recapitalization, a strategic merger, or a private equity transaction. When an owner waits until the last minute, options are limited and may be limited to a market transaction.
Just as a prudent investor would plan the transference of any financial asset, the privately owned business exit has the best outcome when it is planned and worked towards.