At leading Strategies we know that as a new business owner, you are likely to be consumed by the excitement and adrenalin of running your startup with your focus very much on the here and now. Whilst this will help you get your business off to a flying start, it is also essential that you plan for the future and have a solid exit strategy in place from day one.
Whether you intend to create a business that you will work in until you retire or build a company that you plan to sell for a large profit in the near future, the decisions you make at the outset can have a huge implication further down the line.
Carefully planning for the exit of your business will help to:
- Shape your business in a way that means you can extract maximum value from the company when it is time to implement your exit strategy
- Identify and prepare any potential purchasers from within the business so they are ready when the time to exit draws near – you can find out more about how we help companies to succession plan here: http://goo.gl/EfwvtW
- Allow you to implement your exit strategy at the right time, eg; when the business is performing favourably or market conditions are flourishing
So, how do you implement a successful exit strategy?
- Plan ahead.
Ensuring you know what your long term goals are and documenting them in your business plan will help you make the right decisions from day one. For example, if you are creating a family business that you plan to pass from one generation to the next, you will take different steps than if you are planning to sell the business to an unidentified buyer in year five.
- Understand the value
Understanding your business will help you to identify what somebody else will be prepared to pay for it further down the line. For example, we all know that people buy from people – if your customers primarily buy ‘you’ and the services you deliver, then there won’t be a tangible business left if you choose to depart. However, if they buy from your website, premises or brand then this is likely to be a far more attractive proposition to a potential purchaser.
- Understand your buyer
If your plan is to sell the business, you need to consider who your target buyer is. In many cases this could well be a competitor or larger company in a similar industry – in some cases it may well even be your employees. Having a clear understanding of who your likely buyer is will ensure you shape your business to meet their expectations.
- Be realistic
Make sure you have a clear understanding of what your business is actually worth. Having an over inflated grasp of the value won’t help you secure buyers or allow you to effectively plan for the future. As difficult as it might be, ensure you are coolly assessing the value and if need be, invite an independent Agent to conduct a valuation on your behalf.
- Decide what is for sale
It is worth bearing in mind that you don’t have to sell your business in its entirety, you can of course sell only specific parts of your overall structure. You may want to divide ownership into different share categories (voting and non-voting) in order to remain in control of making major decisions, for example. If you are planning to sell your business in it’s entirety, any potential purchasers will want to have a clear understanding of whether the business remains self-sufficient without your involvement – are the existing staff likely to remain in place? Will customers be happy to continue trading with the business under new ownership?
There are of course, many variables to be considered when planning your exit strategy. From our experience, the earlier you give consideration to what you would like the future to hold, the more you will be able to shape your business to help you achieve those goals.
At Leading Strategies, we work with a wide variety of people who are looking to establish, grow or exit their business. You can find out more about how we support business owners to create their Exit Strategy here: http://goo.gl/CCmUvb