Planning your Business Exit
It may seem odd to develop a business exit plan this soon, to anticipate the day you’ll leave your business, but potential investors will want to know your long-term plans. Your exit plans need to be clear in your mind because they will dictate how you operate the company.
In an ideal world, you would have considered possible exit route when you first set up your business, at the very least you should start planning a few years ahead.
Planning lets you get your businesses into the best possible shape for an exit. Identify a target year, level of sales or other objective to work towards, If you plant to retire at 60, you might want to start considering your exit at 55. You can always change your plans later if you need to.
One favourite exit strategy of some forward-thinking business owners is simply to bleed the company dry on a daily basis. That doesn’t mean run it into the red – meaning pay yourself a huge salary, reward yourself with a gigantic bonus regardless of actual company performance, and issue a special class of shares that only you own that gives you ten times the dividends the other shareholders receive. This actually isn’t such a bad idea. It’s called a “lifestyle company.” Rather than reinvesting money in growing your business, in lifestyle companies, you keep things small, take out a comfortable chunk, and simply live on the income.
When making a plan it is important to protect the interests of all concerned, business owners need to consider what the consequences for their business might be in the event of a death, serious illness or a change in family circumstances of either themselves or one of their major shareholders or senior board members.
The prudent business owner will not just have a plan in place but review it regularly as times and circumstances change, to ensure the business is always exit or sale ready, whatever happens.
Talk to your financial advisor about how to protect your business. The strategies you can employ to avoid a hostile take-over, or a quick sale, under circumstance when you might not receive the true value of your business. Your financial advisor will also help in drawing up an exit plan to provide income if your plan is to retire, and continue to draw an income or pension from the business.
As part of your planning look at our business from the viewpoint of a potential purchaser by thinking about whey another business, often a competitor, might want to take yours over. Identify USP and capitalise on it. It may not be as simple as your bottom line, but be your intellectual property or your key clients, you may have a good team of employees, an excellent management team or perhaps your premises may offer an ideal opportunity for their expansion.
Make sure all your paperworks is in good order, not just for the smooth running of your business, as your paperwork provides a snap shot of your company for a potential purchaser, and have a business plan in place that covers at least the next 3 years.
Make sure that your premises are clean, tidy and well maintained and create a great first impression. Your reception and receptionist needs to be welcoming and efficient. It is important that the person answering the phone is able to deal with most everyday queries and is able to transfer the caller to someone who can deal with something more technical. Every caller needs to be considered in the light of a potential customer.
Your website is you business’ shop window, you have to make sure that it gives the right impression, more often or not organisations will set one up and consider it job done. Regular posts and updates give the impression of a busy, active company. Keep your social media channels open as well by regularly posting fresh stories and articles and re-tweeting items of interest to your customers.
A busy thriving business will always be of interest to a potential purchaser, and it is usually just when the business is doing really well that you will receive the best offers, which, or course, is just when it can be hardest to let go!