Buzz Harris: An exit strategy can help you sell your business for more by doing less (Voices)

While operating a business, there can be myriad challenges that an owner faces, many times in the same business day. As a result, when they decide to sell their business, they can shortchange themselves because their focus on today's challenges prevents them from planning for their sale.

Too often, business sellers might have been able to secure a higher price for their business if they had an exit strategy in place.

An exit strategy is a long-term plan for transferring the ownership to their company to another. Unfortunately, research shows that most business owners don't have this.

For many sellers, an exit strategy tends to be reactionary in nature. They react to issues associated with the actual transition, contracts, leases, taxes, personnel, estate, planning, etc.

Unfortunately, what is often overlooked are the operational strategies associated with preparing the business for sale. From this perspective, one of the biggest operational shortcomings I come across are good profitable businesses where the owner is too involved in the businesses day-to-day operations.

A great litmus test to determine this is for an owner to answer the following question, “Can they walk away from their business for one or two months and come back to find it operating smoothly and profitably?” If they are unable to honestly answer “Yes", they are too involved in their business. Even if it is profitable, the result is that the business will not be as attractive to prospective buyers which will negatively affect the sale price.

No matter what industry a business is in, the owner should not be a prisoner to the business. In fact, the business should give the owner greater freedom, not less.

There are four usual traps associated with this phenomenon. First, many owners are former technicians now operating as owners. As accomplished technicians, they have a hard time letting go of such expertise and familiarity. They get trapped in their technical comfort zone, mindset, and work approach.

Second, since owners excel at their technical expertise, they often fall short in delegating. They trust only themselves because they believe “No one does it as well as me.”

Third, many owners confuse activity with accomplishment. It is easy to sometimes confuse business with results. The more the business grows, the harder the owner works.

The fourth shortcoming is that many owners don't create and document the processes, procedures and policies that allow for well organized, smooth running and easier to manage companies.

To reverse the above business bondage requires a different approach to operating their business. Fortunately for business owners, there are resources available to assist the owner and moving in a new direction.

By working less in their business, an owner can gain more time to work on their business and make the necessary changes to enhance the current income statement and hence, the businesses value when it is time to sell.