How to prepare an exit strategy

close up of man holding a sign that says 'time to say goodbye'

Whether you are looking to sell your business in the near future or let a younger generation take over, planning your exit strategy is essential.

 

What is an exit strategy?

An exit strategy can also sometimes be referred to as succession planning. In its simplest terms, it’s planning how you will leave the business. For many people, this will mean getting the company ready for a new owner.

It’s often not a quick process, and so you should start planning well in advance. Depending on your involvement in the running of your business, it could take a few years for everything to be ready.

 

Think about when you would like to leave

Consider in detail when would be the right time for you to no longer be part of the business. Think about the options available to you and the financial impact of each one.

 

Are you going to sell?

Is your business going to be for sale on the open market or will another member of your team or family take over?

Are you hoping for a clean break, or would you still like some involvement?

Do you just want to receive a lump sum of money and leave the business behind?

Or would you like to remain involved in some way, retain your shares, or continue receiving an income in alongside minimising your day to day involvement?

These are crucial questions to answer when deciding how to make the most of the company you have built up over the years.

 

Get your accounts in order

If you do plan to sell, even if it’s to a family member, you will need dependable financial records for potential buyers to look at. Speak to your accountant about getting your finances in order and all the documentation up to date.

 

Look to increase profitability

For those planning to sell, then look at your key performance indicators and identify any areas where profitability could be increased over the coming months or years.

An improvement in company profits could make a real difference to the price you sell at. Look for efficiency gains and processes that can be streamlined or automated.

 

Have good written operational guides

Make sure you have processes documented, clear organisational charts, job descriptions and effective procedures for all aspects of the business. If these aren’t up to date, then make it a priority before putting the company on the market.

 

Reduce your involvement

You need to have a practical plan to reduce your involvement in the business. In effect, creating a company that can run without you.

This may involve delegating tasks over a period of time or training existing staff up to cover your role. You may also want to be less available over time, so not going to the office every day.

 

Know what your business is worth

Get a valuation of your business so you have an idea of what the financial benefit could be. If the amount is lower than you expected, then this also gives you time to create an alternative plan or delay your exit.

 

Create an effective sales pitch

Buyers may often want to meet with you, the owner, to discuss buying the business. You need to have honed a compelling sales pitch that gets them excited about the purchase. Identify the financial reports that will help and have facts and figures to back up any claims you make.

 

Plan for the future

Very few people stay in their business for the whole of their life. Exiting a company is inevitable to some degree. Whether it’s by selling the business, retiring, or ill health forcing your hand later in life.

Planning your exit strategy means you are in control of how it happens, and by creating a robust plan for the process, you can ensure you make the most of the opportunity.

Even if you decide to delay your exit after all the preparation, your efforts won’t go to waste as having an efficient and competent company can only be to your benefit.

If you are considering the future and wish to discuss when might be the right time to exit your business, then we offer a free 30-minute consultation with an experienced business consultant. Contact us on 01424 776 214 to make an appointment.

 

Further information

If you found this information useful, you may also want to check out the following:

 

MRA specialise in business solutions and are Life Centred Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells.