How To Prepare An Exit Strategy For Your Business
Exiting a business is not something that a lot of business owners and entrepreneurs plan on from the start. But as tides change, and you consider other ventures to explore, it means you might need to exit and try something new. To ensure that your hard work doesn’t go to waste, you must know how to prepare an exit strategy. This is true with an Amazon business, which you need to prime for the market because there is a huge potential for Amazon buyers.
Before you delve into building that perfect exit strategy, first, it’s important to know why you need one at all.
What is an Exit Strategy?
An exit strategy has a downbeat effect to it. It signals the end; sort of like the funeral for your business. Therefore, many businesses try to avoid this conversation because some simply do not want to face the fact that the business they’ve worked hard to build will come to an end.
However, building an exit strategy is smart and practical. It is part of the cycle of life. You start a business, grow it, leave, and then move on to your next venture. An exit strategy lets you move forward on your own terms.
Do take note that an exit strategy won’t work on a failing business. It isn’t a way to salvage a business that’s already waiting to wither and die. It’s something that you plan way ahead of time, even before you have made the concrete decision to sell.
How to Prepare an Exit Strategy: Key Steps
An exit strategy isn’t something you can work on overnight. It requires patience, structure, and your commitment. Start with a goal. What do you want to achieve when you exit your business, and how do you want to sell it?
With all that said, it’s important to look at the steps of how to prepare an exit strategy.
Step 1: Know Your Business’ Value.
The first step in selling your Amazon business is to determine if it’s worth selling at all. You need to assess your business’s profitability over the years by compiling a solid financial report. The most important components of a business’s value and salability are strong sales and easy to collect accounts receivables.
It’s also important for your business to have a current solid customer base. On top of the financial factors, the non-financial aspects of your business also have an impact on the future value of your Amazon business.
Step 2: Time the Sale Properly.
The timing of the sale is also a critical factor to your exit strategy. Obviously, you must sell your business when there is a high market demand for your products or services. It pays to understand the trends in the market. This will enable you to choose the most profitable time to sell.
Step 3: Plan for the Future
Sustainability is one of the most important factors that potential buyers look into when buying an Amazon business. When you build your business’s exit strategy, it pays to set it up for success, even when you are no longer directly involved.
Develop a formidable long-term marketing strategy that will enable your business to succeed even long after the closing of its sale. You won’t succeed with simply trying to make a quick buck; you need to showcase to potential buyers that your business can bring them sustainable sales and profits.
Step 4: Market Your Business
This is the most critical step in planning an exit strategy. It directly impacts to whom you sell your business, for how much, and how soon.
A common mistake for Amazon business owners is that they assume buyers will come rushing to them. But as experience will teach you, it can take years before you can sell your business. Work with brokers so they can assist in the sales process. Take full advantage of any marketing tool or platform that is available to you.
Step 5: Build the Sales Structure
This is where you lay the groundwork of the sales. This is also where you must work with a legal team to iron out the deal. Make sure you clearly define what part of your business you sell and what part remains under your ownership (if applicable).
You can also hire a lawyer to handle the legalities of the transfer of business ownership and to protect the buyer's legal rights (as well as yours, the seller).
Step 6: Know What Tax to Pay
Taxes are an integral part of the business sales process. If planning an exit strategy, you need to know what taxes you need to pay, along with other miscellaneous fees.
Step 7: Finalize the Sale
The final step is the closing of the sale. Even if you have entered an agreement with a potential buyer, or they have negotiated with you, nothing is guaranteed until everything has been officially signed. You need to prepare an Agreement of Sale document to be signed by all parties involved. Make sure you close the deal as soon as you have finalized the agreement.
Mistakes to Avoid in Your Exit Strategy
A lot of business owners tend to focus their time and effort on building a winning exit strategy. While that’s good, it is also important to anticipate where things can go wrong so you can hedge against them.
- Don’t wait until it’s too late to start planning. You need to build your exit strategy at least a year prior to the date of intended sale. Some experts even suggest starting 24 months before the sale.
- Not having a clear exit goal. A clear goal will eliminate the unknowns and allow you to manage risks. This is very important in terms of the financial aspect of selling a business.
- Not fully maximizing the salability and value of their business. This is why it is important to give yourself enough time to develop your business so you can sell it for a significantly higher value.
- Failing to implement your plan properly. A good exit strategy is only as effective as its implementation. Make sure you follow through with your plan so you can achieve your goal.
Knowing how to prepare an exit strategy isn’t rocket science. You need to nurture your business over time so that when you do decide to sell your business, potential buyers will see the value and the effort you’ve put in.