fbpx

Does Your Business Have An Exit Strategy?

Jul 20, 2020

Every successful business owner knows that planning is essential. Without a well-thought-out strategy, it’s impossible to get through those first crucial years let alone continue growing!

But what happens at the other end of the business life-cycle?

Have you thought about the future of your business, including how and when you might want to bow out and move onto something else?

Regardless of the age of your business, it’s helpful to have an exit strategy in place.

Today we share why it’s important, and what kind of options are available.

What Is An Exit Strategy?

While it sounds like a cool name for a Bruce Willis movie, an exit strategy is not quite so dramatic. It’s simply a well-managed plan for ending your involvement in a business when the time comes.

Perhaps you plan to grow the business to a certain profit-margin before selling, or maybe you want to hand it over to the next generation when you retire. Whatever your choice, a plan will help guide you, your team, and the business through the transition.

Having an exit strategy helps you to assess the value of your business and if it can operate without you directly running it.

Why Is An Exit Strategy Important?

On a personal level, an exit strategy enables you to step away from the business at a time (and in a manner) that suits you.

A well-thought-out strategy can help land you a higher sale price if that’s the option you go for, or it can ensure the business continues to thrive under different leadership.

You know the old saying – failing to plan is planning to fail. A planned exit is far more desirable than an unplanned or unforeseen one. Knowing that you have strategies in place for possible outcomes can help you stress less about the future.

Different Exit Strategies

Family Succession

While not as common as it used to be, family succession is still possible. This is where you sell or transfer your business to a family member for them to take over. Although this may seem like a straightforward option, family relationships can be challenging, even at the best of times! A solid strategy for succession will help smooth the path.

Management (Or Employee) Buyout

This is when the existing management team, or a group of employees, pool their resources to purchase the business, taking full control and ownership. This is an attractive option as the people taking over already know the business well, making for a smooth transition without any major upsets or reshuffles. A buyout also gives you the flexibility to stay on in some capacity if you want to keep your toes dipped into the business.

Acquisition Or Merger

With this exit strategy, your business is either purchased by – or merges with – another company. While not the easiest thing to achieve, a merger would allow you to negotiate the price of your business and may secure you a high return on investment. The downside is that selling a business can be time-consuming, and isn’t an option for everyone.

Go Public With An IPO (Initial Public Offering)

Many an entrepreneur dreams of taking their business public and raking in the profits, but it takes a special kind of business – and a desirable economy – to be able to do so.

However, if the timing and conditions are right, you can work towards selling shares in your business.

Liquidation

This isn’t necessarily a negative option. In fact, if you have been successfully running a small business single-handedly, it may be your smartest choice. Liquidating means closing the business altogether and selling any assets.

What You Need For An Exit Strategy

In order to develop an exit strategy, you need to have certain information available. This includes:

  • An idea of how you might exit the business
  • Strong financial records (your bookkeeper can help you compile these)
  • Business value (assessed on assets and goodwill)
  • A strong plan for succession
  • Assurance of continuity (having key suppliers that understand the business can help the new owner operate with business as usual – a bookkeeping team can make sure of that)

While it can be daunting to think so far ahead to the potential end of your business, proactive thinking now can ensure success down the line. If you are not quite sure where – or how – to start, have a chat with your accountant, bookkeeper or business advisor to ensure you set off in the right direction.

If you are trying to sort an exit strategy for your business or simply want a strong bookkeeping team to help you in day to day operations, then the team here at Admin Army can help.

Our expertise in finances and business processes can help you develop the right kind of exit strategy for your business. Plus, we can provide the continuity that the new owner will need for the business to continue to operate well. Give us a call today!

FREE BOOKKEEPING CHECKLIST

Taking care of your own bookkeeping? Download our FREE checklist.

WHAT OUR CLIENTS SAY

Receive the latest News and industry tips straight to your mailbox!