If you are a practice owner or manager, you might be thinking about how to exit your business someday. Whether you plan to retire, sell, merge, or pass on your practice to a successor, you need to prepare well in advance to ensure a smooth transition. Here are some of the best strategies for a successful exit from your practice.
The first step is to clarify your personal and professional goals for exiting your business. What are your financial needs and expectations? How do you want to spend your time and energy after leaving your practice? Who do you want to take over your role and responsibilities? How do you want to maintain your relationships with your clients, staff, and peers? These questions will help you define your vision and criteria for a satisfying exit.
Begin by clarifying your objectives for the transition. Do you want to retire, start a new venture, or simply reduce your involvement? Understanding your goals will guide your entire transition plan.
Don't focus solely on your goals for after the exit. There are three phases of exit: 1) Pre-Exit 2) Exit 3) Post-Exit You'll want to set goals for each phase - and then start working on them BEFORE you begin the process. If, for example, you want to be gardening more post-exit, start engaging in gardening now. Start getting yourself into the habits and activities now (even if just a little bit), so that you're not dealing with a sudden, jarring shift of identity after the exit is completed. 78% of business owners who exit express regrets within 2 years. A major part of that comes from not having set themselves up to transition properly.
Also need to determine if the business will continue to be responsible for ongoing professional indemnity insurance for your personal ongoing liability for relevant statutory period.
The next step is to plan your timeline for exiting your business. Depending on your goals, you might need to start preparing several years before your desired exit date. For example, if you want to sell your practice, you need to evaluate its market value, find a suitable buyer, negotiate the terms, and finalize the deal. If you want to transfer your practice to a successor, you need to identify, train, and mentor them, as well as communicate the change to your clients and staff. You also need to consider the legal, tax, and regulatory implications of your exit strategy.
Typically years are necessary, and it’s never too soon to start. I was too focused on the day-to-day to allow myself to back out. As I looked toward what was next, it became easier to see how I would need to develop leaders to take over for me. Staying focused on the big picture helped me (and my team) settle into our new roles.
Establish a realistic timeline for your exit. Consider factors like financial preparedness, training successors, and market conditions. Having a well-structured timeline ensures a smoother transition.
The third step is to optimize your practice for a smooth transition. This means improving your systems, processes, and performance to increase your efficiency, profitability, and attractiveness. You can do this by streamlining your operations, updating your technology, enhancing your marketing, expanding your services, and developing your team. By optimizing your practice, you can boost your reputation, client satisfaction, and goodwill, as well as reduce the risks and challenges of handing over your business.
This means looking at your business not by how unique it is, but how a buyer wants to see it. Shore up weaknesses and standardize anything that’s not a differentiator so your buyers can visualize how easy it will be for them to take it over. When talking to your team, they should see how they’re capable of making decisions without you.
Streamline your business operations to maximize its value. Identify areas for improvement, whether it's enhancing profitability, reducing inefficiencies, or updating technology. A well-optimized business is more attractive to potential buyers or successors.
Critically review all pet projects, any contra deals, favoured contractors and suppliers, under-performing team members, and legacy systems to ensure due diligence by external parties, would not result in negative assessments.
The fourth step is to engage your stakeholders in your exit plan. Your stakeholders include your clients, staff, partners, suppliers, and professional network. You need to inform them of your intentions, expectations, and timeline, as well as address their concerns and questions. You also need to involve them in the transition process, such as introducing them to your successor or buyer, facilitating the transfer of knowledge and relationships, and soliciting their feedback and support. By engaging your stakeholders, you can ensure their trust, loyalty, and cooperation.
Communicate openly with key stakeholders, including employees, clients, and business partners. Address their concerns and provide reassurance about the transition's impact. Keeping everyone informed fosters trust and minimizes disruptions.
The fifth step is to manage your emotions during the exit process. Exiting your business can be a stressful, challenging, and emotional experience. You might feel excited, relieved, proud, sad, anxious, or conflicted. You need to acknowledge and cope with these feelings, as well as seek help from others if needed. You also need to avoid letting your emotions interfere with your decisions, actions, and communications. By managing your emotions, you can maintain your professionalism, confidence, and integrity.
Exiting a business can be an emotional process. Acknowledge your feelings and seek support from advisors or mentors. Embracing a healthy mindset can help you navigate challenges with resilience.
This is often the hardest step for the “craftsperson owner” who built their business around their own expertise. When it comes time to sell, many owners struggle to allow others to take over, dramatically lowering the value of their business. In my experience, working with a disinterested third party with relevant experience can provide highly-valuable support throughout the process. My clients typically see a dramatic increase in sale value, free time, and quality of life as we work through the process.
The final step is to celebrate your achievements after exiting your business. You have worked hard to build, grow, and exit your practice. You have made a positive impact on your clients, staff, and industry. You have accomplished your goals and fulfilled your vision. You deserve to celebrate your success and enjoy the rewards of your efforts. You can do this by hosting a farewell party, sending a thank-you note, sharing your story, or taking a vacation. By celebrating your achievements, you can close your chapter with gratitude, joy, and pride.