At some point, most small business owners will ask: What is next for me beyond this business?
“I want to pursue something new.” “I’m burned out.” “I wonder if I could sell this business.” “My family member or employee wants to take over, and maybe it’s time.” “Retirement sounds good!”
If you are having a similar thought, it may be a good time for a business audit. A business audit is essentially a business check-up — you are assessing the health of your business so you can make well-informed decisions about next steps. A business audit is a great management tool to use at any stage of business… ideally annually!
An exit planning business audit is a tool to help you specifically evaluate your readiness for an ownership transfer and determine if your business is a good sales prospect. Will your business be attractive to a buyer or will it need improvement prior to offering it for sale? Is the business’ goodwill of high enough value to attract interested buyers, or are you better off selling physical/tangible assets and simply closing the business?
Here are some initial business audit questions to consider when exploring a business ownership transition:
Your business exit motivations:
- Why do you want to exit your business?
- What do you want to do next?
- Do you want to leave completely or stay involved in some way?
- Do you have any conditions for a business sale?
- Do you have a vision for your business even after you aren’t involved?
The status of the business:
- Do you have up-to-date financial statements that match your tax returns?
- Have sales revenues and profits consistently increased over the past few years?
- Does your business have a distinct competitive advantage?
- Does your business operate with clear written procedures and agreements?
- Can your business operate without you, or with you in a different role?
- Does your business have opportunities for growth?
Your answers to these questions (and many more!) will help you determine the right next steps for you and your business, and the best timeline for an ownership transition.
A business exit can be complicated and we encourage you to start thinking about your business exit well in advance. You want time to consider what an exit would mean for you and your business well before you are ready to make this change. You want a transition that won’t negatively affect your employees and the vendors, clients or customers reliant on your business.
Don’t wait until your business is struggling or you are desperate for a change before you act. With thorough exit planning, you can improve your readiness to transition and the value of your business!
At Paul Terry & Associates we help small business owners answer the many questions related to ownership transition. We take clients through an exit planning audit — prioritizing business ownership transition motivations, evaluating the business’ strengths and weaknesses, and assessing the readiness for a business sale. Then we help business owners create a plan for a successful transition.