By Crissa Shoemaker The Intelligencer, Doylestown, Pa.
WWR Article Summary (tl;dr) Each year, SCORE provides small business mentoring and workshops to more than 375,000 new and growing small businesses nationwide. In this special edition of "Ask SCORE", members take a look at the importance of knowing how and when to exit your business.
Just as you need a business plan to start a new venture, entrepreneurs should consider having an exit strategy to implement when it's time to move on.
I suggest creating an exit strategy in tandem with starting your business.
Before you line up your first customer, it's a good idea to know your game plan for leaving the business. Why? Simply put, knowing your strategy for leaving the business puts you in the best possible position to build the business based on the objectives of a future buyer.
I liken business exit strategy to first-time homebuying. As a new homeowner, you realize that you will not live in that first house forever. Along the way you may remodel the bathroom or kitchen or undertake other improvements that ultimately improve the home's value for the next owner.
The same idea applies to businesses. You are building a business that you know will have value to another owner in the future. Build the business as if you're going to sell it to somebody but operate it as if you're going to run it forever.
That was the approach my business partner and I followed with our company. We created an exit strategy from the time we started the company.
In every industry there's an optimal time to sell the business and a less than optimal time to sell.
The economy can play a critical role in an entrepreneur's exit strategy. For the most part, when everything starts to align, it might just be the time to move on.
An exit strategy is an important indicator of business success as it can be used as a guide to keep the business -- and its objectives -- on track. A good exit strategy protects the business' wealth and assets and helps to ensure a smooth transition.
To be most effective, the exit strategy should be well thought out and include personal goals or benchmarks of the business owner. It's also important to research and understand the options available and determine which best fit the business. Entrepreneurs may want to consider some of the conditions that would lead to an exit, as well as conditions that would deter an exit.
When it comes time to exit, one of the most common mistakes that business owners make is thinking their business is worth more than it is. I suggest periodic appraisals from a business broker or analyst to help shed light on your business' true value.
Beyond a brick and mortar location, a prospective buyer would be purchasing inventory, and, perhaps most importantly, customers. Over a substantial time period, a business is likely to amass a substantial customer database and that's a large piece of the business acquisition.
That's why customers are so important to the life of your business. Make your business as successful as possible by retaining good customers and providing value for today's business -- and future owners.
Bob Leventhal has served as a volunteer mentor with SCORE Bucks County for nearly one year. A born entrepreneur, he grew up in a restaurant business owned by his family. He later spent more than 20 years owning and operating two businesses.
Ask SCORE is written by members of Bucks County SCORE. Each year, SCORE provides small business mentoring and workshops to more than 375,000 new and growing small businesses nationwide. ___ Distributed by Tribune Content Agency, LLC.