It’s Business, And It’s Personal

The importance of an exit plan for business owners

On Behalf of | Aug 30, 2018 | Buying & Selling Businesses |

Burnout, impending retirement or simply a wish to seek out new opportunities are some reasons why business owners sell their companies. However, it is important for business owners in North Carolina and elsewhere to have an exit plan. Creating a plan may make it easier for the company to transition from its current owner to the new one. Having a plan is also a good idea if a company will be transferred to a family member.

When creating an exit plan, it is important to identify who the ideal buyer will be and how long it will take to sell the company or transfer it to another party. It should also list a series of action steps that could increase the company’s value. Finally, the owner should decide whether he or she wants to stay on as an adviser after the sale or transfer is complete.

How the business is sold can influence its selling price. If a seller demands a cash offer, a buyer typically offers only 70 percent of the list price. However, if the seller is willing to finance a portion of the sale, the company will sell for 86 percent of the asking price on average. Generally, franchises are valued using the discretionary earnings model, but others can be used if appropriate.

Individuals may need assistance when it comes to business transactions such as selling a company or transferring ownership. An attorney may be able to offer guidance during this process. Specifically, an attorney may review a purchase offer to determine if it is in the seller’s best interest. This person may also help with any issues that arise during the due diligence period. Ultimately, having the help of legal and other professionals might result in a higher sale price for the seller.