The Art of the Exit: Common Obstacles to Exiting for Small Business Owners

Have you thought about the day you decide to hang up the boots and pass the torch of your business? Most business owners feel pride, relief, and, unsurprisingly, anxiety when considering the common obstacles to exiting that small business owners face.

Often, this anxiety leads to decision paralysis surrounding what you will do when the time comes to transition out of your role. In fact, according to a survey by the Exit Planning Institute, only 20% of small business owners have written plans to transfer ownership, despite 80% saying they want to stop working in their businesses in the next ten years. This startling statistic underscores the emotional and logistical challenges of exiting, even if you’re ready.

If you want the process to go smoothly, you have to start thinking about your plan long before the time comes to make the transition. The first step of that exit planning step is coming to terms with the many hurdles small business owners face leading up to their exit. 

Common Obstacles to Exiting for Small Business Owners

First, we’ll discuss some of the most common obstacles to exiting. Remember, every exit planning process looks different. You may experience just a couple of these obstacles or all of them. The key to success is recognizing them and working through them. 

Emotional Attachments

The bond many entrepreneurs feel with their businesses is profound. After pouring your heart, soul, and countless hours into a venture, it becomes a part of your identity. It creates deep-rooted emotional attachments that often make letting go seem impossible. 

You might find yourself second-guessing decisions, postponing the exit, or being overly picky about your potential buyers. 

The first step toward dispersing the emotional fog is acknowledging it. A trusted exit planner can help you recognize and confront them healthily and objectively. 

Accurate Valuation

Valuating your business accurately is a balancing act between your venture’s intrinsic value and the market realities. It’s easy to let emotions inflate the perception of your business’s worth. On the other hand, potential buyers might undersell its value to get a better deal. 

To bridge this gap, consider employing a neutral third-party expert. They can offer a fair valuation based on financial health and market standing, ensuring you get an offer that mirrors your business’s actual value.

Choosing the Right Buyer

The right buyer will offer more than a fair price. Instead, they’ll understand the unique DNA of your business, from the culture you’ve nurtured to the ideas you value most. 

Ideally, the new owner should resonate with these values, ensuring the business’s longevity and the sustained trust of its customers and employees. Take the time to engage in open conversations with potential buyers to assess their compatibility with your business culture. 

Tax Implications

A business sale can bring about substantial tax consequences depending on how the exit is structured. Without proper planning, you can take a severe hit with unexpected tax bills that erode the profits from the sale. 

Consulting with a tax advisor or accountant with expertise in business sales can offer clarity and help optimize the exit structure for minimal tax liabilities.

Planning for a Seamless Transition

The actual handover of the business is a critical phase. It’s not just about changing the name on the door but ensuring that ongoing projects are completed, clients are reassured, and employees feel secure about their roles. 

You should spend a significant portion of time planning a comprehensive transition plan, detailing everything from the transfer of knowledge to the adjustment of business operations. Regular communication with all stakeholders, especially employees, is vital to maintain morale and operational efficiency during this period.

Final Thoughts

Once the business is sold, what’s next for you? 

Whether retirement, starting a new venture, or something entirely different, an exit planner will help align your business’s exit strategy with your future plans to ensure a seamless transition for the company and you.

While facing these common obstacles to exit planning can be scary and stressful, having a certified exit planner or business coach by your side is like having a trusted navigator for uncharted waters. Their expertise, experience, and support can make the process more aligned with your aspirations.