Top 5 Signs It’s Time to Start Planning Your Business Exit

No matter how much you love your business, you’ll likely not work at it forever. In fact, a large majority of business owners, up to 51%, plan to leave their business within the next 10 years. 

The goal is to take a step back from running the business, retire, and spend their golden years in comfortable retirement. However, the idea of exiting may stress you out, particularly if you do it without preparation. 

The good news is that it’s never too late to create an exit plan for your business. The first step, however, is to know when the time is right.

Read on as we explore the top 5 signs it’s time to start planning your business exit.

What is Business Exit Planning?

Before moving ahead, let’s ask the big question. How are you planning to exit your business? 

Not many business owners can answer this question. In fact, according to The Exit Planning Institute, just about 15% of business owners nearing retirement are prepared for this transition. This lack of foresight often leads to a rushed sale and a lot less value.

Business exit planning are the steps you take when planning to leave your business. This plan ensures that the eventual transition of your company, whether selling it, handing it over to a successor, or closing it down completely, is seamless. It's also there to ensure that the final outcome meets your personal, financial, and business goals.

While there are many different exit strategies for businesses, the Quandt family is a good example of a succession-based exit. Even though BMW is one of the world’s biggest car makers, the family planned for continuity and made a conscious decision to retain a significant ownership (currently around 47%).

This example shows how proper planning can preserve a business and family legacy for generations.

5 Signs It’s Time to Start Planning to Exit Your Business

There are signs that’ll tell you when it’s time to start preparing, and recognizing them can help you protect the value of your business. Here are 5 of these signs.

1. You’re Ready for Retirement

This is your first and most obvious sign. After years of building and working on your business, you’ve hit your personal milestones or retirement age, and you’re ready to call it a day. But here’s the thing, retirement doesn’t happen by accident. All your ducks must be in a neat row to guarantee comfort at the end of your work years, and of course, that means proper exit planning.

According to Richard P. Slaughter Associates, the earlier you begin, the more options you’ll have.

2. There Are Changes in Your Personal Circumstances

Another key sign that you need to start planning your exit is when your personal circumstances change. Maybe you recently had a health scare. Or you have a family member, such as a sick child or spouse, who needs you more. Whatever the reason, an exit plan is more important than ever to ensure stability and business continuity.

3. You’re Getting Increased Interest from Potential Buyers

According to a recent Gallup study, 74% of business owners polled plan to sell their business and retire. If you fall into this group, and you’re suddenly getting a lot of interest from potential buyers and investors, that’s a clear sign to start putting your plans together.

Even if you’re not selling immediately, an exit strategy in place will give you some leverage. At the very least, you’ll know what your business is worth, whether or not to entertain the offer, and how far you’re willing to negotiate.

4. Your Business Has Peaked

Every business has its highs and lows. When the highs become consistent, take advantage of them.

Exit strategies for business work best when you’re in a position of strength. You're more likely to clinch a better deal when sales are stronger, there’s high customer demand, and your business has a competitive advantage.

Even if market conditions aren’t favorable right now, planning ahead will help you take advantage when they are.

5. You Want to Pursue New Ventures

Sometimes, the biggest sign is the uncomplicated one — you’ve lost interest in your business. Maybe you’re burned out, maybe you’ve outgrown the business, or maybe you simply crave other exploits. Whatever the reason, it's a good excuse to start considering an exit.

Take Elon Musk, for example. He co-founded Zip2, which was sold in 1999. Next, he co-founded X.com, which later became PayPal, and was sold to eBay in 2002. Today, he owns around 40% of SpaceX, the company he went on to build. The point is, he’s always had an exit plan that allows him to step back and move on to the next big thing.

Final Thoughts

In business, timing is everything. It’s important to know the right time to scale. It’s also important to know the right time to step back.

Planning your exit is not about giving up; it’s about planning the next stage of your life to ensure that everything works out right. Whether you’re looking at a pending retirement or just itching for the next big adventure, the right exit strategy will help you leave on your own terms.

Start planning today, so that you can determine your tomorrow.