Small Business Owners Lack Exit Strategy

Most small business owners don't have an exit strategy when considering selling their businesses, according to a new study from the Center for Women's Business Research.

Sixty-seven percent of men and women surveyed had no written sales plan and 43 percent had not conducted a formal valuation of their businesses.

The study, "Exiting Your Business: Serendipity or Strategy," which was underwritten by Massachusetts Mutual Life Insurance, found that interviewees who didn't have an exit plan were not able to respond quickly enough to changing markets and ultimately had to shutter their firms. Those executives who were able to sell their business "were the ones who had clear goals and parameters which allowed them to position their companies and choose their strategies accordingly," according to the research center.

Many of the business owners considering leaving their business tapped into their networks of entrepreneurial associates for advice and most of them turned to an accountant or attorney for help.

Sharon Hadary, the executive director of the women's center, said one of the more interesting findings of the study was that women put a greater emphasis on the future direction of their companies than men.

"The study revealed that it was more important for women to have confidence in a buyer's personality and vision than it was for men," she said.

As part of the study, the center conducted in-depth interviews with nine women executives who sold their businesses, all of which generated at least $4 million in annual revenue.

They offered these recommendations:

* Run a business every day as if it is for sale.

* Be aware of your goals and parameters by knowing what is acceptable for you in a sale.

* Don't publicize prematurely to employees and others that could be affected that you're considering a sale. When you're ready to sell, be decisive.

* Get buyers' promises in writing and find a buyer who shares your vision. Include conditions of the business and the sale in the sales documents.

* Develop your own investment and insurance portfolio separate from the business.

By Sharon McLoone |  October 17, 2007; 11:40 AM ET Tools and Tips
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