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Story Archive > ISHR By-Lined Articles > Building Your Entrepreneurial Legacy: Preparing for Your Exit - by Monique Dearth Honaman

Building Your Entrepreneurial Legacy: Preparing for Your Exit

   By Monique A. Dearth — Enterprising Women Magazine

The On-Ramp/Off-Ramp trend is receiving quite a bit of press lately as women leave corporate jobs in droves to seek more balance and options.  Many of these women cite reasons such as a desire to spend more time with their children, care for aging parents, or simply a need for more flexibility. It is many of these women who have ‘opted out’ who form the growing number of women business owners and entrepreneurs who start their own companies after leaving their corporate assignments.

But, what about women who are currently entrepreneurs and successful business owners who decide to ‘opt out’ from their own enterprises? How and when do these women decide when they have reached the point where they are ready to sell their business and do other things? How do successful women business owners leverage their desire to exit their own businesses?

Most women business owners know how important it is to have a solid business plan when starting a new endeavor. Experienced women entrepreneurs will tell you that it is just as important to have a plan for how to end your business, whether by selling it, closing it, or handing it off to someone else in the family to run.

The RSM McGladrey 2007 Survey of Women Business Owners surveyed 650 women business owners.  Interestingly, when asked about the ‘primary long-term goal’ for their business, respondents in the smallest business revenue class wanted to primarily “generate enough income to provide for a comfortable life.” However, as revenues increased, so too did the number of respondents who not only wanted to generate additional income, but furthermore also wanted to “build a business and sell it to make enough money for retirement” and “build a business to pass on to future generations.”

Clearly many women business owners are thinking beyond the idea of just ‘making money to pay the bills today,’ and instead are thinking ahead to the day they step out of running the business. Yet there exists a perception that women are not as prepared as men to formally develop and implement an aggressive exit strategy.  The myth exists that women who own small businesses typically don’t focus on developing an exit strategy. Two recent studies provide perspectives on this point.  
In a study underwritten by Massachusetts Mutual Life Insurance, “Exiting your Business: Serendipity or Strategy,” researchers found that most small business owners don’t have an exit strategy in place.  Statistics show that 67% of small business owners surveyed had no written sales plans, and 43% had not conducted a formal valuation of their businesses. When small business owners did consider leaving their business, they most often turned to their network of entrepreneurial associates and relied on accountants and attorneys for help.   

The study conducted in-depth interviews with 9 women executives who sold their businesses which each generated at least $4M in annual revenues. These 9 women offered terrific advice for those considering the possibility of a sale in the future:

  • Run a business every day as if it’s 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 or others who could be affected that you are considering a sale.  When you are 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 your business.

In October 2006, The Center for Women’s Business Research completed a comprehensive study, “Exit Strategies of Women and Men Business Owners.”  This report purported to ‘bust’ the myth that women business owners tend not to be prepared to exit their businesses.  It stated that the vast majority of women business owners (83%) do have a long-term exit strategy, and like men, they rank price as the most important factor to consider when selling their business.  The research suggests that women entrepreneurs prepare as well as men when deciding to exit their business. Several interesting facts emerged:

  • Both men and women business owners believe that price is the most important factor to consider when selling their businesses, but women were more likely to also consider personal concerns about the future of their business and the well-being of their employees.   
  • Women business owners are more likely than men to consider the buyer’s identify, personality and background when looking to sell their business, and are more concerned about what the buyer intends to do with the business in the future.  
  • First time women business owners are typically less prepared to sell their businesses than women who had previously owned a business.  
  • Women business owners are nearly twice as likely as men business owners to intend to pass the business on to a daughter.

The net result? Conventional wisdom dictates that women are typically more attached to their businesses, and therefore less likely to have a clearly defined exit strategy.  In fact, perhaps the opposite is true. Perhaps women business owners are demonstrating a growing maturity, a deeper understanding of this last phase of their business cycle, and are increasingly likely to have long-terms plans in place for exiting their respective companies.     

Monique A. Dearth, J.D., is the Founder and President of Incite Strategies. Incite Strategies focuses on global Executive Assessment and Development for companies like GE, The Home Depot, StatOil, and Ventana Medical Systems, and through HR OptIn provides flexible HR project management solutions to mid- and large-size companies. Monique can be reached at 678.513.7661.

More information on the reports referenced above can be found through the Center for Women’s Business Research.

Last Updated 6 Year(s) ago