Can You Time Your Business Exit?

Can You Time Your Business Exit?

The Importance of an Exit Plan

If you’re wanting to time your business exit, stop. It’s possible that you’ll luck up and it will work out, but why leave the success of your exit up to chance. One of the greatest benefits of having an exit plan is the fact that you can make the timing of your exit irrelevant. And that’s exactly what we are going to talk about today—how to make the timing of your exit irrelevant so that you can exit when you’re ready and with the wealth that you need.

3 Factors Influencing Your Exit

There are a lot of factors that play into having a successful exit beyond the obvious of having a business that’s profitable. So let’s break it out into three parts. You have:

  1. your personal timing,
  2. your business lifecycle, and
  3. the private capital market cycle. 

Personal Influence

First, let’s take a look at the things that influence your decision. There’s your age, your health, and how much motivation you have to continue onward.

If you have children or family members that you’re wanting to transfer the business to, you have to consider their readiness as well. Do they have the skills required to manage people? Do they have good rapport with the employees? Are they even interested in taking over the business?

You also have to consider your spouse if you’re married. Their life going to change if you are no longer spending as much time working. How are they envisioning things once you’re around all the time? Are they ready for your to exit?

Business Lifecycle

So, you’re already seeing there are a lot of moving parts on your personal side. Now, let’s add the business cycle into the mix. As you think about your business, what stage of the business cycle are you in? Are you growing rapidly and expanding? Are you hitting your peak performance? Have you matured? Are you at the point where you’re coasting along, your profits are stable, and you’re maintaining the status quo, or are you further along in the growth cycle where you’re starting to see some declines in the pace? Are you thinking about what the future may hold?

Private Capital Market Cycle

And finally, let’s consider the capital market cycle. When you look at the capital markets, what do you see? How many buyers are out there right now and how much money do they have? Are they willing to spend top dollar for businesses? Are interest rates going up and slowing things down? How long are deals taking to close?

Examining Personal, Business, and Market Timelines

Each one of these factors has a significant influence on your exit. Now, let’s jump in and take a look at a few graphs to help us understand what these cycles look like.

Personal Timeline for Business Exit
Personal Timeline

The first timeline that we’re going to look at is your personal timeline. And, with most business owners, you start off with a lot of enthusiasm, you’re really ready to grow like fire. Then, as you mature, things start to slow down a little bit. You get into the routine of your business and you become complacent. You’re less likely to have a deep desire to continue growing it.

Business Exit Timeline
Business Lifecycle

The next timeline that we are going to look at is your business timeline. So, as your business is in the early stages, you tend to see some slow growth at first, followed by some exponential growth before things really start to stabilize. After a while, you start to see some declines, and begin looking for new ways to innovate, and bring life back into the business, but things are trailing off.

Private Capital Timeline for Business Exit
Private Capital Market Cycle

Finally, let’s look at the private market cycle. So, private market cycles tend to happen more frequently. The economy may be doing well so companies have more money to consider acquisitions, or interest rates may be allowing investors to leverage more. However, the opposite could be true as well. The economy could be struggling, interest rates may be high, or there could be new tax laws. These things could be making buyers hesitant and willing to pay less. They may not be willing to spend that top dollar to acquire a new business.

Now, seeing how different these cycles are, when is it going to be the right time for you to exit?

The Challenge

Is it going to be when you’re getting tired and your business is starting to decline when the market goes straight up? Or, is it going to be when your business is really starting to do well but the markets are declining and there’s not enough buyers out there?

How are you going to time your business exit?

How are you going to line up your personal timeline with your business and everything else going on in the market?

Can you time your business exit?
P=Personal, P.E.=Private Equity, B=Business

Well, you’re probably not. Most owners can’t, and it’s been proven time and time again throughout history that it’s impossible to time the market consistently. That’s whether you’re talking about the stock market or the private equity market.

So what are you supposed to do if it seems like there’s no possible way to time your exit?

Well, it’s not as complicated as it might sound, but it does require some effort. In order to have a business that’s transferable, both in the good times and in the bad, you’ve got to get laser focused on the activities that build transferable value in your business and you’ve got to unlock your personal wealth.

Taking Control

The way you overcome the challenge is by building an exit strategy. Your exit strategy aligns your business, your personal, and your financial goals and gives you a framework to build your business and unlock your wealth. As you implement your strategy, you’ll be focused on what’s actually going to drive your business value and wealth upward. 

That’s what’s going to take you from trying to time your business exit to making the timing of your exit irrelevant. You’re always focused on building value so you’re always in a spot to get the best value you can. Your timelines may not line up perfectly, but if you have a plan, you’ll be better off every timeI.

Scroll to Top