How long will it take you to exit your business?
Posted on September 15, 2021 by Jonathan Goza, One of Thousands of Executive Coaches on Noomii.
Most business owners underestimated how long it will take them to actually exit their business. Plan ahead so you can leave when you want to.
If you are a typical business owner, you don’t give much thought to leaving your business someday because you are focused on running your business today. This is a key reason that owners fail to plan for their exit. Specifically, how long will it take to exit your business?
Let’s assume that you have built a business that is sellable today (i.e. it offers the rewards with low risk that buyers want)…and that is a big assumption, especially if you really want to maximize what you may get out of the business. How long will it take you to exit your business from the time you make the decision to sell until you have cash in hand and your business is in your rear view mirror?
If you are normal, you can plan on spending FOUR YEARS or more to make that happen! If you are like me, I did a double take when I saw that number….but let me explain why…first, is that businesses are unique things and can take quite a long time to sell. You should plan on at least a year from when you make the decision to sell before you have signed papers. Even after you find a buyer, there will be time for due diligence, negotiations, attorneys and accountants ironing out details, etc… even simple transactions (when done properly) will take months to fully get through the process.
In most cases the owners are key to running the business, so without you in the business, the value of the business is severely diminished. Most buyers will require you to stay on for some time after the sell to help transition the business. Normally this time will be somewhere around THREE YEARS, but as many as five is not unheard of. Depending on how dependent the business is on you, if you will not agree to stay, the value of the business will be negatively impacted and may be much more difficult (if not impossible) to sell.
One Year (Selling Process) + Three Year (Earn Out Period) = FOUR YEARS
Of course no owner thinks of themselves as “typical”, and with proper planning you don’t have to be. As Steven Covey taught, “Start with the end in mind” …plan ahead so you can leave your business when and how you want. The more intentional you are about how you run your business the quicker you will be able to leave once you make the decision to sell.
