When you start a business, it’s tempting to think that you will cash out with a Google-like IPO (Initial Public Offering). Although this happens to a lucky few, the majority of business owners exit their company under different circumstances.
The most common trigger that causes a business owner to consider selling their firm is an unsolicited offer from another company. One of your competitors, suppliers or an industry peer will watch your success and approach you about a merger. It usually happens out of the blue.
The second most common trigger is a health scare. The owner, a close friend or spouse has a health issue, which causes them to reflect on how short life really is.
Interestingly, both of these triggers are externally generated and as a result could trigger a hasty sale with a discounted price. In my experience, you need a proactive plan to sell your business to maximize your valuation.
For example, I’m on the advisory board of a small company based in California, and I’m writing this post on the plane on the way to our next meeting. I just read the company’s board package, and it’s trying to decide between four different growth strategies. It has outlined the possible exit options—complete with potential strategic acquirers—associated with pursuing each plan.
If you want to get the highest price for your business, don’t leave your exit planning up to somebody or something you don’t have control over. Be proactive and define your own exit strategy.