Closing Your Business – A Battle of Head and Heart

I heard an interesting quote once. “People run a business like they watch a movie… not knowing how it will end.” That’s a jolting statement. In helping entrepreneurs develop Business Plans, we ask about their Exit Strategy, very few have even considered it. What we emphasize is that you will undoubtedly leave your business one day. One day, you personally, or your product, or your market, or industry will be obsolete – Why not prepare?

Build your business such that the proceeds from the sale will be sufficient enough to cover your expenses and future obligations. When you sell out of necessity due to lack of revenue or other conflict, you may make decisions that are not ideal. Let’s face it, sometimes this is just the case and you have to deal with it. Illness, burnout, and partnership termination are all legitimate reasons, but your Exit Strategy planning makes a difference in making deliberate and profitable decisions or unfavorably shooting from the hip.
There are the practical tasks to complete the process, but there is also emotional preparation.

The Practical Side
· You have to file dissolution paperwork with your Secretary of State and the IRS, cancel vending contracts, close bank accounts, and a myriad of other tasks including fulfilling open obligations. Your reputation will continue to follow you and be an indispensable tool. Make sure you focus on outstanding tasks and honoring your word.
· How do you know the Fair Market Value of your business? An experienced Business Valuation professional is a highly beneficial service. You can easily find out the value of your stock holdings in public companies, but when it comes to private companies, what is it really worth? In the same fashion that lenders review your books to understand what leverage they have in a prospective loan, when it comes to closing your business, the same process is used to effectively know the selling price of your business. Not only are your financial assets part of your value, but there are intangible items like your location and your customer database.

The Emotional Side
· Emotions run high when transitioning from a business. Ask yourself: What is your motivation for selling? Can you walk away without regret? What will you do Day 1 after the sale? Will you be able to maintain the same or better lifestyle? Will you make enough money to justify your hard work? Will you ask to be involved in the business under the new owners as an employee or external consultant? Mental preparedness is so important and makes the process less emotionally driven.

· And not to be forgotten, a good Wealth Manager will help you plan well and spotlight your current and future financial needs.

Outbox Tip:
If you are the only one that brings value to your business, you’ve effectively devalued your business. Who wants to buy a business where all the know-how and intellect are hinged on one person?