Business owners get caught up in the day-to-day challenge of establishing and growing a business, and it often doesn’t feel like the right time to think about your business exit planning . Yet an exit strategy should be a core part of your business planning.
The more time you invest in advance of exiting your business, the more control you will have over the eventual business value and the process is more likely to run smoothly. Here’s my top things to consider when business exit planning.
1. Exit strategy – Engage advisors early
Speak to a professional advisor sooner rather than later. Discussing your business exit plans will give you fresh, expert insight into your business and help make your business exit planning strategy successful. This work should include:
● the structure of your business and where assets such as property sit
● the best use for any surplus cash
● undertaking tax planning to maximise the eventual post tax value to you, the shareholder.
2. Business exit planning – cultivate healthy financials
Another key aspect of business exit planning is cultivating stable profits and nurturing healthy financials over a period of time. When it comes to a business sale, potential buyers and investors also want to see a stable track record of healthy profit and cash flow, combined with profit forecasts based on evidence. This means getting your house in order with things like key contracts etc.
3. Continue to focus on growth before your business exit
Even if you are planning your business exit, don’t stall your business growth plans. What impresses buyers and funders is an outward-looking business that knows its market well and can spot opportunities. At the due diligence stage, purchasers will scrutinize your forecasts, challenge your assumptions and ask where projected growth will come from. Careful business exit planning should not only secure your future but should also secure the future of the business too.
4. Make yourself redundant
Before your business exit, it’s crucial to build up your senior team so that your departure doesn’t have a detrimental effect. When it comes to selling a business, a strong management team is attractive to potential buyers and their financial backers. Cultivating a strong senior team might also raise the possibility of a management buy-out. There’s also reassurance in knowing that your team can handle things in the event of illness or other absences is reassuring.
5. Put your business sale and exit in safe hands
Beware of trying to manage a business sale and exit yourself. Selling your business can be a long, tiring and distracting process for business owners and can have a negative impact upon business performance at just the wrong time.
Marketing can be kicked off in a discreet way initially and a suitable target list can be compiled. An information memorandum should be prepared with the aim to give a positive, yet realistic reflection of the state of the business. This will give all parties the same information to enable you to consider bids on a comparable basis and will give potential purchases less chance to chip away at the price.
6. Make time for business exit planning
Most business owners have a long-term goal of selling the business at some point, but most don’t give enough time and attention to business exit planning. When many owners come to sell the business, it often seems like a snap decision for which they’re ill-prepared for with the result being a drawn-out process, with some surprising events and a less than satisfactory outcome.
The key to maximising exit value is business exit planning, getting trusted advisors on board as early as possible, understand what steps you can take to maximise your business’s value and put in place a realistic business exit strategy.
Talk to us
If you want to learn more about how to successfully implement business exit planning then find and contact your local Haines Watts office and see how we can help you and your business today.
Why your people are important during your business exit
An exit is sometimes the first time that business owners truly appreciate that it is the people who form the heart of their organisation.
Is it time to scale up or sell out?
As a business matures, an important decision arises: is it time to keep the status quo or invest time and energy in taking it to the next level?
Find and contact your local Haines Watts office