Have you had a major life event such as an illness or a divorce that has made you stop to think about your financial future? If something were to happen today, do you have a plan in place to make sure your business can operate with or without you? If it is necessary to completely exit real estate, have you tracked your business so you can prove the value?
The value of your business will change over the years, but what do you have of value you ask? You have what we call “Intellectual Property,” which is now considered an “asset,” equipment we never had before, software, expertise and people. In the beginning, any individual agent’s business is little more than the sum of the agent’s collective vision and specific talents. Should they leave, not much else of value will remain.
Over the years, however, there are clients who have come to depend on your services, and there is a revenue stream — tangible income that makes it easier for an investor or buyer to put a price tag on it. Knowing your business’ price tag becomes essential if its full value is to be realized.
Exit strategies as a goal
We recommend you begin to consider the exit strategy question as an opportunity to educate yourself about what is truly needed. You will see your exit strategy less as a termination and more as a logical part of the goals you have set for both yourself and your business. In order to be prepared to sell, exit or merge your company, you must take the time to prepare your exit strategy. An exit strategy can — and must — change, as the business and its goals change.
Working as an entrepreneur, with no consideration of the way you want to end or change the business, will cause you to fall short of your goals in the end. The reality is unless you define that end or change; your business may change in a way that was not in your plan. Educate yourself through listening, reading and interacting to know what others strive for in similar businesses.
So what is a good exit strategy? An exit strategy is a record of your
business. Using a tool such as a Sales Tracker will allow you to track the necessary three to five years of the results of your client base, the sales from buyers and sellers, your costs involved in creating that client base and your income. It is essentially a track record enabling a potential buyer to duplicate just what you have done to generate income.
Remember, success is finding a system of generating leads, conversions and transactions which can be duplicated. It is an important issue because it establishes the value of your business. Since a buyer will want to look at three to five years of traceable amounts of clients, marketing, advertising, follow-up costs, etc. it took to achieve the annual income, the time to start is when you have created a business plan.
Here are the 10 most important things you need to consider about exit strategies:
- Decide where you want to be in 5 years, 10 years, and 20 years.
- Make sure your team and your employees know your goals or plans for growth and change.
- Stay flexible, and have a backup plan because business, life and goals change.
- Update your business plan every 6 months, and make sure it includes an exit strategy.
- Keep your financials current, review them monthly and have them audited yearly. It adds to their value.
- Put together a team of experts, including a Certified Public Accountant (CPA), an attorney and a financial advisor or other expert for valuing your business and intellectual property.
- Run the company every day as if it were going to be sold.
- Remember that a mistake is thinking it will be easier getting out than it was getting in.
- Prepare a “selling your company” file and checklist for monthly/annual reviews to keep on track to meet your goals.
- Consider that attempting to sell your business on short notice means you are not in control of the sale.
Write down your exit strategy. Have a start date and the date you would like to exit. Know how to answer the question, “What is your exit strategy?” but also know you are really answering the question, “What are your vision and goals?” Realize that, through identifying your exit strategy, you have a much better chance to preserve and control what happens with your business.
Make A Commitment: I will do what is right for me!
Deadline: ________