(Copyright 2013 by Execute on Strategy, LLC)

One of the most important decisions an entrepreneur can make is how to leave his or her business. Yet, many entrepreneurs fail to plan in advance just how they will make their exit when that time comes. It seems surprising that many entrepreneurs would neglect this aspect of their businesses, as the very act of running a successful company requires foresight.

“When you first start a business, you live and breathe that business,” says Tensie Homan, co-author of Beat the Exit Bubble: The Ultimate Guide for Exiting Your Business. “You feel that you can make good decisions.” But when it comes to selling that business, fear of the unknown can get in the way.

Most entrepreneurs, Homan says, will only sell one business in their lifetime. Therefore, they aren’t experts, and most don’t know how to even begin the process of selling. Their lack of preparation often leads to the increased likelihood of making costly mistakes when getting to ready to sell their business. It may even lead to a failure to sell.

Homan saw this repeatedly throughout her career. In her line of work as a mergers and acquisitions partner, she says, she sat across the table from a number of sellers and saw that most of them were unprepared for the process of selling their businesses. “They made the same mistakes over and over,” she says. “It was painful to watch.”

No matter how early it may seem, devising a plan to leave – whether by selling the business, by leaving it to family members or by closing the doors – is as important as planning any other aspect of a business. In Beat the Exit Bubble, Homan and co-author Dan Meyer point out that 5 million baby boomers are expected to leave their businesses over the next five years, and 10 million could leave over the next 15 years. These sellers, Homan and Meyer warn, will face a shortage of buyers for their businesses. While the majority of baby boomers who are entrepreneurs intend to live on the money from the sale of their enterprise when they retire, 75 percent of those ‘boomers don’t have an exit strategy.

In the first chapter of Beat the Exit Bubble, the authors cite a quote from Steve Covey in his book, The 7 Habits of Highly Effective People: “Begin with the end in mind.” That concept is emphasized throughout Beat the Exit Bubble. The authors stress the importance of preparing a business for sale well before life after the sale emotionally and financially; and of viewing the business through the eyes of a buyer.

Throughout their book, Homan and Meyer provide a wealth of information in a conversational tone that makes for smooth reading. The reader will learn how to choose the best exit option, how to estimate the value of his or her business, how to improve its value, which questions to ask a potential buyer, lessening re-trade risk and what to expect during the diligence process. Many other topics are covered, among them entering the actual exit phase, including finding a buyer, structuring the transaction, controlling communication about the sale and the importance of accuracy in preparing for diligence. Homan and Meyer also provide a summary of takeaways for each of the book’s three parts and a glossary of terms.

The authors bring a good deal of experience to Beat the Exit Bubble. Tensie Homan performed due diligence on more than 200 companies during her career in mergers and acquisitions.

Dan Meyer has helped companies improve their operations over the years and has created and sold a couple of businesses of his own. Last year, Homan and Meyer also created a website, exitbubble.com, to provide information to business owners about exit strategies.

Currently, 25 percent of business owners who attempt to sell their enterprises fail, the authors write, and the expected overabundance of ‘boomer-owned businesses on the market in coming years will make matters worse. The lack of an exit plan is a significant factor in these failed sales.

“Preparation and educating yourself early are very important,” Homan says. Armed with the knowledge provided in Homan and Meyer’s informative book, entrepreneurs who intend to fund their retirement by selling their businesses will have a better chance of realizing their goals.