Exiting or selling a business can be a risky and uncertain endeavor. There are myriad advisors, consultants and other service providers around to give you advice. A wise seller will always consider the source to make sure the advice provided is in the seller’s best interests. Also, because advice can vary between different types of advisors (and the same types of advisors), sellers should always make sure that the advice matches the goal(s) the seller group wants to meet – especially regarding “how” and “when” to exit. But a seller group won’t know what goals to seek until they have accurately weighed available options.

And then there is the actual transaction/transfer. Even when dealing with a thriving business – one with a viable story, committed stakeholders/employees and the right adviser team – the final deal terms and valuation are somewhat guided by market factors and other factors that may be beyond a seller’s control. For example: how hot your industry or sector is, the capital available to the ideal buyer(s) at that particular point in time, the personalities and history of the buyer(s), and the political and economic environment (to name just a few) – all of which can change before, during and after a transaction.

In many cases, when considering transactions for small and medium-sized companies – the seller wields more control than the buyer. The trick for most sellers is, like many people, knowing what they want. A deal must be managed properly from start to finish to maximize value, efficiency, transaction certainty and chances of success.

There are hundreds of considerations to evaluate when making an exit decision. No article, book or seminar can cover all of them completely. But when taking steps to exit your business or company, almost everyone considers at least these key questions:

The right votes: Are all relevant stakeholders on board/on the same page?

You may need approval from certain shareholders before heading towards a certain path. Change in control provisions in key agreements can make or break a deal. How are key customers/suppliers going to react to the transition? How will the transaction impact financing facilities?

Culture and other transfer considerations: How transferable is the business?

Do you have customers, vendors and talent that will transition seamlessly to a new buyer/operator? Are the processes, technologies, intellectual properties, policies and know-how all properly protected and ready for (easy to) transfer?

Exit scale: Do you want a partial or full exit?

At the time of this writing, more buyers are willing to take on a partial stake, often a less than controlling stake – in order to get a foot in the door or test the waters. In many transactions, the buyer would prefer to have the key operations and management personnel rollover some of their proceeds from the sale into equity in the “Newco” (the buyer). Some sellers are open to a partial exit (taking some money off the table at a good time) while others have goals that prohibit anything but a complete exit.

Type of exit: How do you want to exit?

Outside party: sale to a third party, IPO (generally not an option for smaller businesses), recapitalization, liquidation, or other options.

Inside party: MBO (management buyout), sale to existing equity/partners, ESOP (employee stock ownership plan), intergenerational transfer or other options.

Every exit option has pros and cons. The pros and cons for each option compared to market conditions, your business and your goals, will likely drive the decision regarding the preferred exit method. Chief among these considerations is often determining which structure will bring the greatest value.

Timing considerations: When do you want to exit?

As with any exit or business transaction, timing is key. Many clients have told me that their plan is just to “live forever.” Sounds good. But I like to call that the “head-in-sand” approach to exit planning – which often doesn’t end as well as it could have.

If you are like most sellers, you care a fair amount about maximizing enterprise value/sale value. So, you will need to consider several elements of timing. Where in the business life cycle is your business? Where in the market cycle is the best (or at least a better) time to exit? And where are you (or your company’s leadership) personally from a timing perspective (near retirement, facing health issues, etc.)?

Timing has more variables than covered in this article. Often a business faces regulatory hurdles that take time and must be taken into consideration. What is your competition doing to impact your exit timing? At least in certain industries, seasonality and cyclicality, along with political and other market changes, can make timing a business exit very difficult. Nobody knows as many facts about your business as you – what are all the timing considerations that should be factored in for exiting your business?

The biggest timing consideration that I’ve seen is . . . when you start planning for exit. While I’ve had sellers come to me and say that the letter of intent with a buyer is already signed and both parties want to close fast – the more sophisticated sellers come to me 2 to 5 years before exit to prepare for the exit and to have ample time to consider options and engage in planning. You or your business can be negatively impacted by various sources at almost any time. The happiest sellers are always prepared to sell at any time – just in case the right event or opportunity presents itself. Exit planning should be done every day – from the date the business was started. But if that wasn’t done – there is no time like the present to begin.

Before your work is done: What is your post-closing availability?

Not every seller group has a staff/team in place that can run the show without them. The buyer will either want such a team, need to hire some people, or will want you (and maybe some other key personnel) to stay on for a period post-closing – or some combination of these scenarios.

After your work is done: What do you want to do post-closing? Or, if you are staying on post-close, what do you want to do after the post-closing transition period?

Many clients have told me that after the deal is done – they want to do nothing. I believe most of those have enjoyed a period of relaxation post-close (recovering from the work involved in a sale, deal fatigue, decades of building a company, etc.), but then quickly realize that their family didn’t want them doing nothing all day, or that they were not predisposed to being idle, got bored without having something to build/be responsible for, or that they just missed being in business and wanted to buy or start another business to run.

Personal Financial Goals: Will you receive enough consideration from the transaction to do what you want to do post-closing?

If your dream is X, you need to be able to afford X for your remaining years. And you won’t know what that looks like unless you consider and nail down what it is you want to do post-closing.

For example, if your dream is to have a place in Colorado and a place in the Caymans – you’d better know that before selling, so that you know how much money you need to live in these locations for remaining years. If you intend to live in Florida or Puerto Rico – knowing this sooner rather than later can have significant tax ramifications. I personally don’t like to work with any seller who has not met with a good accountant and a good financial planner/wealth manager to run some projections and help with some planning before they even start considering exit options.

Legal considerations: Is your legal house in order?

Many clients have consulted with me on specific areas of concern pre-sale. However, almost every business could use some general corporate clean-up, help with updating to current employment/labor laws, licensing and regulatory review, etc., etc.

Buyers don’t like to buy risk. If they find something wrong, they wonder what else they will find and wonder what else is wrong that they may not find during their review period.

Advisors: Do you have the right deal team in place?

There are many advisors/types of advisors. In many cases, the bare minimum team includes a CPA, a wealth manager/planner, and an attorney. Many sellers are better off using an investment banker or broker to help market/facilitate the sale of a business. An M&A/business attorney should be involved early on to review agreements with any outside professional and to ensure confidentiality. Some clients have asked me to help identify the right brokers/bankers to work with on exit options, for their industry and size.

Some advisors are better than others. Not every accountant has enough experience with selling companies to advise properly. Some consultants/advisors have impressive sounding initials after their names (but when you dig deeper, those might be given out by for-profit entities, after a very small exam that can be retaken multiple times – whereby almost everyone passes and obtains the designation – to ensure ongoing dues/revenue for the granting organization). Not all business attorneys know a lot about business or have any place advising sellers on a sale process. Not all business brokers or investment bankers have a ton of experience selling companies – or with selling your type of company. The right advisors can make all the difference between a bad deal and a good one.

These are only ten of the more common considerations (themes) that almost all sellers must face to get to the goal line with thoughtful exit planning. Many sellers are also hugely concerned about their legacy (the community, the employees, etc.) and are concerned with rewarding those who have been loyal and helped make the seller group successful. Every seller has a unique blend of considerations – the important thing is to actually consider them and do so as soon as possible. Many sellers fail to plan properly and are faced with chaos management of last-minute options/last minute analysis. This causes many sellers to either fail, or being very reactive – without much time to consider the bigger picture At a minimum, ignoring exit planning leaves a seller with fewer options instead of negotiating from a place of strength. Good exit planning leaves a seller group with a greater ability to pivot/be flexible, which leads to a much greater chance of a successful exit.