More than half of small business owners hope to leave their businesses within ten years, but three-quarters of them have no plan in place, according to a recent survey.
Exit plans are necessary to secure a business owner’s financial future. But many don’t think to establish one until they’re ready to leave. People don’t build a company just for exit, but being prepared for it will help you to realise the full value of all your hard work and enable you to focus on building your business and the day-to-running. If you prefer, think of it as a succession plan.
Key factors in a business exit strategy
Exit strategies depend on the circumstances of each business but there are some key factors to consider when planning your exit.
- Decide what you want to walk away with – Is it just money? Or is your legacy and seeing the small business you built continue more important? This will influence how you exit the business.
- The right time – When you exit the business largely depends on the type of business you’re in, the consistency of the revenue and how long your business has been around. Good practise is to plan your exit at least 5 years in advance.
- Consider your stakeholders – Exit plans should take into account not only the business owner, but the customers, employees, and investors, too.
- Good bookkeeping is key – Accurate and detailed financial information is essential to the eventual sale of your business. Get your house in order. This includes listing your assets, contracts and business processes as well as sales projections and debts.
Types of business exit
There are a number of exit strategies for small businesses to choose from, ranging from liquidation to selling the company to the employees. The best exit strategy for your business is the one that best fits your goals and expectations. I’ve simplified them into two main options below.
- Selling – There are two main approaches to this: sell to someone you know or target a larger company or investor to acquire your business.
- Closing – There are two main ways to liquidate your business: close up shop and sell assets as quickly as possible or liquidate your business over time, also known as a “lifestyle business,”.
There are advantages and disadvantages in all options but whatever you decide, planning for exit can remove a lot of the uncertainty over the future of the business and leave you well prepared to deal with the transition, whether it happens in two weeks or twenty years.
How we can help you exit a business?
Exiting your business is inevitable so it’s never too soon to build a business exit strategy. If you would like to discuss your options in more detail, please contact us.