By Bruce Hakutizwi
If you’ve already developed an exit strategy, you’re in the rare minority among small business owners. Doing so puts you in an excellent position to sell your business “on purpose” – being proactive and strategic rather than reactive and ending up with less than you hoped from the sale.
But, unfortunately, most small business owners don’t give their exit strategy enough thought or they jump to the conclusion they’re not going to need one at all. But the fact is every business owner should have a thoroughly mapped out exit strategy in place. After all, no one can predict the future perfectly, so no one can tell if any or all of the following circumstances might suddenly get between you and your business plans for the future. Here are some signs that it’s time to put your exit strategy into action.
Chronic Illness and Aging
As we get older, our bodies start to rebel in one way or another. If we’re lucky, it’s just aches and pains and a loss of energy. If we’re not so lucky, it could be more serious.
Either way, there’s a very good chance that, at some point, every small business owner is going to face the prospect of not being physically well enough to effectively run the business. Whether this is due to the business being physical in nature – such as a construction business, plumbing, landscaping, or something similar – or because of the number of hours and energy required, it’s an inevitable part of getting older.
Even before we reach our twilight years, chronic illness can rob us of energy and stamina, making running the business difficult or even impossible.
No one wants to consider the possibility of divorce, especially if your marriage is happy right now. But it happens to more than 50% of first-time marriages and over 60% of second marriages, so unfortunately, it’s very common.
Beyond being a highly emotional and painful process, coping with divorce is also potentially devastating from a financial standpoint. If a small business is not thoroughly protected via incorporation, it could easily be swallowed in the ensuing legal battles, requiring a sale to liquidate assets. Even if it is protected as a separate entity, the facts of life after the divorce may make continuing to run the business too difficult or financially unfeasible for one or both spouses.
Not all life changing situations are as negative as divorce or chronic illness, of course.
Having a new baby, moving to a new house, getting married, or adopting a child can all be joyful, fulfilling experiences that have a tremendous impact on a person’s entire life. One of the effects may be that their priorities shift away from running a business, or it may simply become impractical to continue doing so in light of their new situation.
No matter how effectively someone runs their business, they have little or no control over the economy as a whole. Depending on the timing of events, the industry in which they’re doing business, and the severity of the downturn, a dip in the economy could make selling their business an unexpected but necessary decision.
In all these cases, having an exit strategy already established will make facing these circumstances far easier, less stressful, and potentially more profitable than they otherwise would be if they had to face them with no preparation.