Why You Must Start Planning Your Business Exit Now—with the Right Valuation Expert

Many a business owner often contemplates their next life step. You may be such a person. Maybe you’re a serial entrepreneur who loves the rush of a launch phase—but get bored as your company grows. Or perhaps you successfully built an organization years—or decades ago—and now you’re interested in slowing down your schedule to allow for more family time.

For those who are too busy running their business to even contemplate an exit strategy, Sofer Advisors has an important message. Like buying insurance, strategizing your future exit is smart planning for your future. You should always start planning for the sale of your business before life presents you with a chance to put your energies in a new direction.

Why? So your exit can be as smooth—and profitable—as possible.

Planning your exit ahead of time becomes even more critical when you understand one of the major traps owners fall into—selling their business but failing to exit. A great example of this can be found with the tale of Zappos CEO Tony Hsieh. Hsieh became co-CEO of Zappos in 2001, when the fledgling online shoe retailer had revenues of $8.6 million. By 2009, the company had exploded to $1 billion in sales—that’s a lot of shoes! Zappos was especially popular for its customer-friendly policies and Hsieh’s visionary leadership. His innovative policies, like offering new employees $2,000 to quit, are detailed in his excellent book Delivery Happiness.

Clearly, Hsieh helmed a company growing at an astonishing rate with an ever-growing pool of deeply loyal consumers. What changed? Amazon came calling. In July 2009, Amazon fully acquired Zappos in a $940 million deal. This is where things got interesting from an exit planning standpoint—Hsieh stayed with the business instead of walking away.

As the Wall Street Journal explains, Hsieh fought hard to keep Zappos independent and to avoid “Amazon creep.” Despite all this, he faced clashes with the parent company, culminating in Amazon pushing Hsieh and his team to meet aggressive growth targets in 2019. Hsieh abruptly resigned from Zappos in 2020, and sadly died in a house fire just months later.

That’s not the exit any business owner or leader wants. How can you avoid a similar fate? By planning your exit strategy with the talented team of certified experts at Sofer Advisors. We specialize in business exit planning. In particular, there are three important areas we help every client to develop an understanding of as we start exit planning discussions.

Business Exits Aren’t as Simple as You May Think

Many business owners, especially those running their first company, expect that selling their business will be as simple as signing a contract and accepting a check. Almost every sale of a small and medium business is more complex than that—making an exit planning advisor vital to a successful exit.

The sale of your business will likely include complexities like a specified timeline, transition planning, and even earnouts—payments made after a sale based on performance metrics like revenue or earnings targets. Bottom line: When your payout depends on the company’s future performance, it’s critical that you as the owner plan ahead to maximize your total proceeds from the sale.

Business Exit Planning Begins with a Valuation

Of course, effective exit planning isn’t even possible until the current value of the business is made clear. To this end, the Sofer Advisors team completes a comprehensive valuation of your company before exit planning strategies are discussed. In most cases, the expected exit is years away—a survey completed by the Business Enterprise Institute reports 53% of owners want to sell their business within the next 10 years, while 80% plan to stop working in their business in the same period.

Given that a planned exit may be years in the making, Sofer Advisors can help you create a pathway to your desired value at the time of sale now. This process typically includes fixing weaknesses in your operations and finances while also building on your current strengths. In short, the valuation that starts your exit strategy planning and gave you a baseline can also significantly improve your company’s value through annual accountability and progress tracking by the time you’re ready to sell.

Everything Works Better with a Plan

Business owners are already intimately familiar with the benefits of thinking ahead. Just as your business runs better with strong operational planning to mitigate potential problems, your dreams of retiring or moving on to your next challenge will run much better with the proper exit plan in place.

Daily Sofer Advisors works with clients everywhere on the exit planning spectrum. This includes owners who have never thought about exiting planning, those who know they want to sell in the next ten years, and even those who want to sell immediately due to an unsolicited offer or major life event. Whichever category you fall into, it’s worthwhile to get going ASAP. As the adage goes, the best time to plant a tree was 20 years but the 2nd best time is right now.

Thankfully, our team is skilled in helping you achieve the best exit possible. Whether it’s due to retirement or an internal/external sale, we’ll work with you to create the plan that best sets you up for success. To start planning your exit sooner rather than later, contact Sofer Advisors today for your free consultation. Together, we can honor your legacy from what you built and maximize your return so you receive the right payoff for all that blood, sweat, and tears you put into building your business.

David Hern is the founder and chief executive officer of Sofer Advisors, LLC focusing on business advisory services related to litigation assistance, estate and tax planning, and business enterprise valuations for various privately-held and public companies. He is a qualified financial analyst with a proven ability to simply and clearly communicate analysis to boards of directors, presidents and CEOs, CFOs, controllers and private equity portfolio managers. David has been recognized for enabling organizations to determine their enterprise and equity value for a variety of situations including strategic planning, sale or IPO, mergers and acquisitions, financial reporting (common stock, stock options grants, purchase price allocations, impairment analyses, etc.) and tax compliance (estate & gift, 409A, NUBIG). Industry experience includes, but is not limited to, professional services, business service, healthcare, information technology, financial services, and manufacturing & distribution.