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Exit Planning for small businesses

Posted by Richard Ludlow

Tue, Nov 16, 2010 @03:03 PM

One of the biggest mistakes small business owners make is not delegating responsibilities or having employees who share some of the intellectual property of the company. They feel that they can do it better, cheaper and be confident the job is done. While probably true, making sure other people in the company can carry out tasks that normally the owner would do is integral to having a saleable business, as opposed to offering someone a job with assistants.

Why is that important?
When it is time to exit your company, a buyer will want a company that has infrastructure and can operate without the current owner. This is key, particularly in the early stages of the purchase, as he or she will be getting to know the business, its vendors, employees and clients. If the owner is responsible for all relationships, all decisions, all facets of the company, then much of the goodwill will be leaving and the value of the company will be adversely affected. A buyer wants to buy a business, not a job where all responsibilities rest on their shoulders. They will be looking for an operation that runs well and can be managed and grown as opposed to one where the entire company is micro managed by the owner. 

Solution –

  • Make sure several people in your company can handle day to day tasks – client issues, vendor problems and the like.
  • Don’t hold all of the intellectual property to yourself and expect that a buyer will pay you for it and let you go about your life.
  • Look at your organizational chart – make sure that there is a hierarchy that can be traced and that employees are cross trained to cover one another and the owner.

While this might seem like a waste of time and energy, by spending your time ON the business as opposed to IN the business, you will be able to grow sales, increase profits and have more free time to spend on things that are actually important, family, exercise or just working to grow the company.


by Kevin Freeman, Partner

Topics: Selling your business