Business Plan: How Important is it in Selling Your Business

When it comes to anything in life – sports, holidays, or even business – it pays off to have a plan. All of the great business minds have them. Businesses with more than 90% annual sales growth have plans in writing that guide and shape their business strategy.

Different business owners have different goals. Some want to create a family-owned business, while others want to increase the business value and exit. Both require extensive planning.

Today, we’re going to look at the following:

• How valuable your business plan is when selling your business
• What you need to include in your business plan to ensure maximum value
• A couple of things you should consider before formulating your exit strategy

Without further ado…

The Value of Your Business Plan

While a lot of entrepreneurs are good at setting strategic business goals, not many are good at formulating an exit plan. Not knowing when’s the right time to get out, business owners often decide to sell off their business too early, leaving a lot of money on the table.

Now, planning to leave your business doesn’t mean planning for failure. If you started your business with the intention of selling it, an exit strategy will help you meet your profit objectives.

On the other hand, if something does happen, the plan will secure your finances. The investors, business partners, and other business associates will feel more confident in your business when you have a well-crafted exit plan in place. Prospective buyers also appreciate as much transparency as possibly, so if you have a well strategised plan in place you will be much better positioned when it comes to selling your business.

But let’s go back to selling for a second. Selling your business isn’t just about finding the right buyer. There are lots of little things you need to do to maximize the price of your business when selling.

An exit strategy will prepare you for unexpected circumstances. Although it may not be used for years, having a business plan in place will benefit you in the following ways:

• Making decisions with direction – With the next business stage in mind, you’re more likely to make strategic decisions that make progress toward anticipated outcomes.
• Staying committed to the value of your business – An exit strategy requires an analysis of your business’s financial and operational performance. That will help you stay n tune with your business’s overall value.
• Securing a smooth transition – Your exit strategy will detail all of the roles and responsibilities within your organization and the transition plan for handing them off. That will ensure that business operations are not disrupted during the sale.

What to Include in Your Business Plan

The decision to exit a business can be emotional, even for the toughest owners. Selling off something you’ve built from the ground up can be overwhelming. It’s not just about finding the right business partner and negotiating a good price for the business.

A proper exit strategy will ensure that the business’s transition is smooth and that the business continues to grow after you’re gone.

So what should be included in your exit plan? How much detail should you go into? Your exit strategy options depend on many things, including the type of business you’re selling, its growth stage, as well as your goals.

But there are certain things you should include in your business plan regardless of what business you own. Here are the essential elements you should consider:

• Objectives

For starters, including the business’s goals and intentions in the business plan is a good way to set the stage for a business sale. Having clear, concrete goals will help potential buyers understand what you’re trying to achieve and that you’re serious about selling the business.

Do you have a specific return on your investment in mind? Or do you want to maximize the value of the business when selling? Being clear about your goals in the business plan will help potential buyers come to terms with what you’re looking for.

• Timeline

When starting, did you have a clear idea of how long you wanted to stay in business? If so, be sure to include that timeline in the business plan. You should include a timeline for a couple of reasons.

Firstly, it will allow you to plan each step of the business sale process. Secondly, it will help you and your business partner set expectations on how long the business transition period should take.

Lastly, the potential buyers will also be able to see if your business is on track to meet its goals and objectives.

• Intentions

Do you want to sell your business to a business partner, a strategic investor, or a private equity firm? If you’re not sure yet, don’t worry, that’s completely fine. However, it’s something you should think about.

Even if your plans don’t fully come to fruition, it’s important to lay out your intentions in the business plan. That way, potential buyers will know what you’re looking for and what business partner you want.

• Breakdowns

Including business breakdowns such as financial statements, marketing strategies, market analysis, and customer segmentation will give potential buyers an insight into the business’s performance.

Every major and minor deal you’ve made over the course of business operation should be included in the business plan. That will show off your business’s value, including how much business has been generated over the years.

• Conditions

Of course, you can’t precisely predict the future and know what the market conditions will be like. That’s why you should include some contingencies in your business plan.

You might want to include exit triggers such as a business partner adding value to the business or in case there’s an opportunity for you to exit with more money. The business plan should also include what you’re willing to negotiate and how you want the business transition period.

Considering all these things will help you prepare for selling your business and ensure everything goes as smoothly as possible.

Keep in mind that creating a business plan isn’t a one-off thing that you can do and forget. It’s a living document that needs to be updated regularly as business conditions change.

Perhaps, you can set a day or two every three to four months to go through the business plan and make sure everything is up-to-date.

What to Consider Before Selling Your Business

Photo by Scott Graham on Unsplash

Selling a product or a property is different from selling a business. When selling a business, there are many facets to consider and no one-size-fits-all approach.

• Planning

Executing a merger or an acquisition isn’t like putting a home on the market. Your business takes much more effort to sell and will require a lot of planning.

You’ll need to consider business operations, tax implications, potential liabilities, and other legal issues.. Dealing with some of these problems requires professional assistance from lawyers and financial experts.

So the sooner you start putting your plan together, the better.

• Timing

Many people want to retire from business and are looking for the right moment to exit their business. It’s important to consider your age, business performance, and industry trends when deciding when to sell.

Following your industry carefully and understanding how the market moves and how it will respond to certain business decisions can give you an idea of when to exit the business.

• Communication

Talking with multiple partners, investors, and managers when selling your business is important. It would be best to discuss the business’s value, financials, terms of sale, and other conditions to ensure you get the best deal.

And that’s not all. You also have to communicate to your employees what will happen to them once the business is sold.

Some people are under contract, while others have been working with the business for a long time and will be affected by the sale.

• Value

Your business may be worth a lot more than you think. But to get the right value, you need to understand how and why your business is worth certain amounts.

You’ll have to consider assets, goodwill, debt, and other financial information that business buyers will use to calculate your business’s value.

And that brings us to our last point: business valuation.

• Valuation

Knowing how much a business is worth isn’t as easy as one might think. Your finances, operations, and management team all play a role in business valuation.

The best way to get an accurate business value is to hire a business appraiser who can provide you with an objective business assessment. Companies like Boardroom Advisors offer business valuation services tailored to your business needs to give you a more accurate value.

To conduct precise valuations, the company will collect:

• Hard data from your business statements and records
• Qualitative information from business projections, strategy, and objectives

With the valuation report in hand, you can make an informed and confident business decision.

Plan Today, Sell Tomorrow

You can clearly see just how important planning is if you want to sell your business successfully. Having a concrete plan in place will help make the process easier and faster.

If you can map out your journey, business objectives, and exit strategy now, it’ll be easier for you to make business decisions in the future.