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You need an exit strategy from the start
One of the first considerations, when you start your own small business, should be creating an exit strategy.
Often during the excitement of starting a business, new owners overlook planning for their eventual exit. Or they make one of the five big mistakes that can hurt the eventual sale of the business.
When I started my granola company back in 2011, I had no thought to what the future could bring. The fact that I could one day sell the business never even crossed my mind.
So I made the number one mistake on the list… I used my maiden name in the business name. And it was not only my maiden name, but it was also used in the family farm’s name.
Once I got to the point where I no longer wanted to run the company, I had a bit of a predicament since I couldn’t sell the name of the business.
Luckily, with the help of a consultant from the Small Business Development Center, I was able to value the intellectual property part of my business (the recipes) and sell that with an agreement to change the name within six months of purchase.
The five biggest mistakes that will destroy your exit strategy
Here are the five mistakes that could cost you big time when you go to exit your business. Whether you sell, pass on to a family member or just close down, consider these warnings when you are building your business.
Including personal information in your business name
Don’t be like me! When naming your business, consider how you will feel when selling the name. Is it a name that belongs only to you? Or do other people have a claim to part of the name?
Make sure that whatever you name your business, you own free and clear and no one can complain if you decide to sell in the future.
Being the only asset in your business
When you are getting started, you will be the mastermind of most aspects of your business. Make sure as you grow that your business can live independently of you. Otherwise, you are your business and if you want to leave there will be nothing to sell.
Hiring strong employees who are assets to your company is a good move no matter when you want to leave. But making sure to teach all aspects of the job to other people will mean a stronger company overall as well as an easier exit when you’re ready.
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Not keeping track of your numbers
Does bookkeeping freak you out as much as it does me? I hate trying to keep track of everything and I’ve made sure to outsource the accounting as soon as possible in all my businesses
Don’t let your business fall behind in tracking your income and expenses, or you will soon develop a huge mess. It is painful to try and go back to remember what each little transaction is from when you haven’t done your books in a year.
Plus, if you are ready to sell, the numbers will be the first thing that any potential buyer will want to see!
Not planning for an emergency
Being a small business owner means you are essential to the day to day operations of your business. If you’re not thinking about what will happen if you have an emergency and can’t work for a month, your business is in trouble!
Make sure to have an emergency plan in place should you have a health or family issue. It might not be the point at which you leave your business, but you don’t want your emergency to mean your entire business dies and leaves you with nothing to show for it.
Waiting until your ready to leave
Lastly, don’t wait until you are ready to leave to make an exit strategy. Planning ahead will give you plenty of time to think about how and when you want to leave.
Starting to delegate more of the most important tasks, getting your books in order and figuring out your asking price will all take time.
Planning ahead for the end of your business will allow you to build a strong and valuable business that will make you a good profit when you are no longer interested in running it.
Watching out for these mistakes from the beginning will help you be prepared to exit when you are ready, instead of being stuck in a business you no longer want to run.
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