Entrepreneurs generally avoid thinking about harvest issues and issues related to selling a business. Not many companies even have a formal plan for harvesting. Selling a business is usually viewed as an abandonment of the company; or else an entrepreneur is driven to sell business when the possibility of losing the entire company looms large over him. But, as many far-thinking entrepreneurs have demonstrated, selling at the right time can be a strategic move, instead of a last ditch effort to avoid bankruptcy.
The possibility of being forced to sell a company generally arises when an entrepreneur faces difficulties in the market in terms of new and tough competition, entrance of a new technology, excessive losses and so on. A sense of panic grips owners and shareholders and they decide to sell – but this decision comes at the wrong time, for the wrong reason and thus at a wrong price. It is thus very important for a company to have a proper exit strategy.
Harvesting can also be a strategic window, one which can be, and is, treated as an opportunity by many entrepreneurs. Harvest issues can however be enormously complicated. Therefore it is all the more important that one begins to craft a strategy early. When a company is launched, and then struggles for survival, and finally begins its ascent, selling out is usually the last thing on an entrepreneur’s mind. But to have an exit strategy ready, so that it can be capitalized upon when the opportunity presents itself, would be a wise thing for an entrepreneur to do.
Some guidelines to be kept in mind while shaping a harvest strategy are:
1. Patience: Several years are required to launch and build a successful company. The same way patience is essential during that period, it is required at the time of going over harvest issues. A harvest strategy is sensible if it allows for a time frame of at least three to five years, and as long as seven to ten years.
2. Vision: Vision is the sister of patience. An entrepreneur should have the vision to not panic as a result of nerve-racking events. Selling under stress is usually the worst of all worlds.
3. Realistic Valuation: Greed is one of the seven cardinal sins. It can sound the end for an entrepreneur too, if he persists in asking for than his business is worth. A realistic valuation of the business would attract more and better buyers.
4. Outside Advice: It may be difficult but worthwhile to find an advisor who can help craft a harvest strategy while the business is growing, and at the same time maintain objectivity about its value and have the patience and skill to maximize it. Generally outside advisors (such as investment bankers and business brokers) who are associated with the company for a short period act like real estate brokers do – keeping their commission as a major priority. But advisors who work with entrepreneurs for a period of five years or more can help shape ad implement an exit strategy for the whole business so that it is positioned to spot and respond to harvest opportunities when they appear.