How to Improve Bad Business Exit Strategies: Top 14 Tips

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Exiting your business after spending years building it is always an exciting time. It’s essentially all your efforts finally bearing fruit. You’re supposed to get the biggest paycheck of your lifetime.

However, that can all go to the wayside very quickly.  Exiting a business effectively requires a sound strategy. 

If you’ve started the process, but things are getting out of hand, it’s likely that your strategy wasn’t as good as you thought it was. 

Today, we’re going to go over some of the common mistakes made and how to improve bad business exit strategies until they meet your expectations. 

Let’s get started. 

Tell-Tale Signs of a Bad Business Exit Strategy

Before we get into the common issues and their solutions, we need to go over the basics of how you can tell things aren’t going according to plan.

Improving a bad business exit strategy so you don’t fail

This is crucial because the sooner you identify something is wrong, you can work to improve your exit strategy and minimize the impact of your mistakes. For most, this is a once-in-a-lifetime situation. So, you want to get it right.

Even if you’re going to move on to new business endeavors, there is still a lot of money on the line. 

Here are some signs to look out for. 

1: No Buyers

If you can’t find anyone interested in buying your business, there’s a good sign that you have problems you need to take care of or that you’re presenting the opportunity improperly

Even low-value businesses on the brink appeal to a multitude of buyers. So, this is usually a good sign that your strategy needs to be changed immediately. 

2: Deals Keep Falling Through

Sometimes, you’ll get plenty of buyers, but the deals keep falling through before they’re finalized. It’s perfectly normal for a deal or two to fail before you finally find the perfect buyer, but if everyone is walking away, it’s likely a problem on your end. 

3: You’re Overwhelmed

The process of selling a business is complicated. Every part of M&A is. However, if you’re taking the right steps and have a good strategy in place, it shouldn’t be the most stressful period of your life. Things should move along smoothly and at a steady pace.

If you find that there are constantly new problems arising, and the whole thing feels like it’s falling apart, there’s a problem.

4: Low-Ball Offers

You’re going to encounter low-ball offers regardless of how reasonable you’re being. Some acquirers are simply too self-centered and want to get the business for as little as possible, regardless of fairness. 

However, most acquirers understand that that approach will get a deal canceled quickly. So, they’ll try their best to be reasonable. 

If everything feels like a low-ball deal you have to turn down, it’s time to look at your strategy to see what’s causing that. 

Common Problems with Business Exit Strategies 

A number of things can cause deals to fall through, and not all of them are under your control. However, there are several common problems that are under your control, and if you improve your bad business exit strategy to resolve those problems, you can get your attempt to sell back on track.

1: Your Strategy is Too Rigid

Standing firm is crucial in the business world. You can’t cave to everyone’s demands, or someone will take you for all you have. However, when you’re selling your business, it is a two-way street. 

If your strategy involves you being too rigid and refusing to budge on even the smallest details, it will fall apart quickly. You need to be able to negotiate and concede certain desires to be able to get most of what you want. 

Being too rigid with your strategy tends to correlate with a lot of deals falling through. You’ll get to the negotiation phase, and buyer after buyer decides to walk away. 

Fixing this can be as simple as looking at everything you want, being honest about what you can afford to concede on, and then doing so with your next negotiation. 

It could be a small thing holding you back. So, make sure you look at everything, and concede on the things you’re most willing to give up first

2: Overvaluing Your Business

You’re free to ask for however much you want for your business; that doesn’t mean anyone will pay it. 

Your business’s intrinsic value is pretty much set. It’s determined by the overall value of the assets associated with the business.

Improving a bad business exit strategy - evaluating your assets

You can then add to that value with projected increases in value after the sale, special agreements, and other things, but you can only go so far before you’re asking for too much. 

This can commonly be the issue if you’re having trouble finding buyers or keeping them on board throughout the process. If the price isn’t right, it’s not going to sell. 

That doesn’t mean you need to calculate the intrinsic value and then sell the business at a flat rate, but you do need to be realistic about how much value various factors add. 

A good way to get the right price is to consult a professional who can evaluate every little aspect of your business to find a price point that will sell while maximizing profits. 

3: Rushed or Disorganized Prep Work

You can have a great strategy, but if you rush the prep phase, a lot of problems will occur throughout it.

There’s a ton of paperwork that needs to be gathered and organized, debts that need to be eliminated or mitigated, margins that need to be raised, and more throughout the multi-year prep phase to put you into the best position to sell.

Obviously, that’s not always possible, but we’ll talk about that in the next scenario. 

If you don’t properly prep your company for sale, deals can fall through as it’s seen as unprofessional, you might open yourself up to low-ball offers, or any number of things can happen that could have been easily avoidable by dotting your I’s and crossing your t’s. 

Once you’ve done this, the best way to resolve it is to take the sale back to step one and pay better attention to the prep portion of the strategy. You’ll put yourself in a better position to accomplish your goals if everything is in order. 

4: Using the Wrong Strategy 

There are various strategies that can be used to sell a business, and they all tend to work better in different situations. One common thing that can go wrong is you can present the sale as a normal acquisition, but the company isn’t in great shape, and you don’t have the time to fix it before selling it. 

If you’re presenting the company as a great upfront opportunity, but buyers do a bit of digging to find it in shambles, buyers are going to walk away. That doesn’t mean that the business can’t be sold. It just needs to be sold the right way.

If the business is in poor condition, it’s better to base your strategy around methods that promise long-term profit and plenty of valuable assets. The way you frame the deal plays a big part in how well it sells. 

5: A Lack of a Target Buyer

In retail, different products are aimed at different types of customers. The marketing strategy for each product actually gets fairly specific, as well. The same thing is required when selling your business. 

Your strategy should be based on appealing to a certain type of buyer. Are you looking to attract an investor with deep pockets and a willingness to pay a premium, or would you rather work with an allied business rival who will keep your legacy intact?

Maybe you want to avoid third parties entirely and allow your most trusted employees to take on a seller’s note that puts them in charge under your guidance. 

The type of buyer you want to deal with will determine a number of strategic moves you need to make. Take time to consider your options, and you’ll have an end goal to look at while planning the rest of your strategy. 

6: Being Caught Off Guard by Post-Sale Taxes and Liabilities

This is one you HAVE to prepare for. Getting caught off guard by post-sale taxes and liabilities is a lurking danger to all business owners. You shouldn’t oversee this part of the process and be prepared for it from the beginning

A bad business exit plan will leave you with so much tax liability that your life’s biggest earning event seems lackluster and wasteful.

Improving a bad business exit strategy - taking tax into consideration

Preventing that would require you to start considering exactly how you’ll offload your company’s assets.

Selling it as one package, separating various assets, selling shares separately from assets, and various other strategies can be used to take advantage of tax laws and legal liabilities. It’s important to learn as much about each option before structuring your deal. 

7: Not Accounting for Employees and Suppliers

When you exit your business, everyone involved is affected. Ethically, you want to prevent catching them off guard with no opportunity to protect themselves financially. However, one big mistake that sellers have in their exit plans is telling people too soon

When you do that, you risk scaring them away. Your suppliers might consider altering their priorities, and you can expect many employees to leave as soon as they can find another job just in case the new owner restructures the business. 

In your plan, account for the reaction your employees and suppliers might have to the change and determine when it’s ethical and advantageous to break the news. 

8: Not Leveraging Assets

Sometimes, a buyer doesn’t care much about your business. Especially if your business has been failing for a while and it’s going to be difficult to repair. However, they might be extremely interested in a certain asset that you have

For example, you might be a tool manufacturer with a patented wrench design no one can use, and your product is flying off the shelves.

You’re simply not making ends meet overall. Your competitor wants to start manufacturing the tool, but they can’t because of your patents and trademarks. 

Those are assets you can use to gain leverage in a sale. If you have extremely valuable assets, it might be more advantageous to leverage those and target potential buyers who might be interested in them. 

Brand names, patents, unique equipment, or anything else can be leveraged as an asset as long as it’s valuable enough to warrant being the focal point of a transaction. 

9: Not Prioritizing Communication 

Communication is absolutely pivotal when selling your business, and while it’s not a technical aspect of your strategy, it does have a lot of impact. You need to be able to communicate clearly and in a way that highlights your business. Not in a way that leaves your buyer wondering or not fully understanding what you’re saying. 

A good way to handle this is to get one expert-level communicator and have them handle all communications for the project. Not only does this ensure that communications are being handled effectively, but it provides a familiar face for the buyer to communicate with.

They’re not constantly dealing with different people who present different ideas. A relationship forms, and everything is kept well organized. 

10: Not Planning for Post-Sale Life

When you tunnel vision on improving a bad business exit strategy, it’s easy to get so wrapped up in multiple things, whether that’s the transaction that you completely forget about or your needs going forward after it’s completed. 

Most middle-market business owners looking to exit their businesses are aiming to retire. That’s probably the case for you. 

If you don’t incorporate your post-sale plans into the selling strategy, you can easily end up broke within a few years of selling the business. 

To improve your exit strategy, you want to ensure that you adjust your assets or lifestyle to match your expected profits after the sale is completed. In addition, you should be starting to budget your retirement plans and set up investment opportunities.

This will streamline the process and allow you to get right into enjoying retired life instead of panicking because your money is running low. 

Get Help Selling Your Business

These are some common issues and ways to improve bad business exit strategies, but remember that every business exit strategy is different and that you should apply these tips in accordance with the situation you’re in.

The thing that helps the most with creating a successful exit strategy is experience, and not all business owners have that luxury.

But don’t worry – our M&A advisors are here to aid you in your business adventures. 
Contact us, and we’ll help you identify where your exit strategy needs improvement, assist you in making those improvements, and even plan your post-sale life if you plan to retire when it’s all said and done.

TALK WITH AN EXPERT