5 reasons why a business owner needs an exit strategy

Building a business is undoubtedly a tough job. Of course, most of the owner’s energies go into the day to day issues, winning customers, driving/directing the team and generally firefighting! So, thinking about an exit strategy is never on the owner’s top list of immediate priorities. However, there are many good reasons why the owner needs to give some thought to this area; it is a hugely important area of wealth generation that can represent an expensive mistake if not treated successfully.  Exit strategies aren’t just about the immediate job of selling a business – they are relevant throughout the life of the business.

1. An exit strategy gives you a plan.

Thinking long term about a business isn’t just for major corporations. Where do you want your business to be in 5 or 10 years? Will the business deliver the cash to fund the owner’s life style? Producing a plan to deliver the business you want is a hugely valuable exercise.

2. What type of exit is right for you?

A business exit can take many forms. A sale is certainly one option, but maybe a family succession is the right way, or even a management buyout could work for the right team. All of these options need long term planning. The common factor to all of these is how the business would work without the current owner at the helm.

3. How will the business function without the owner?

It is often tough for an owner to envisage how the business would work without them. However, whichever exit route is chosen then the role of the owner will be a key consideration. The owner needs to think through how the business will operate without them. This has a major impact on company’s sale value as no buyer wants to buy a company where all of the key knowledge is locked-in with the owner.

4. An exit strategy forces the owner to take the wider view

We all occasionally suffer from being “too close” to an issue and sometimes this means that we don’t take the best long-term decisions. Standing back from the business means that the owner takes a more dispassionate view of the business. Seeing the business from the perspective of a new owner will help the owner to address and fix some of the more strategic issues.

5. Planning to maximise retirement income.

A lot of business owners have only a vague idea of how the sale of their business will fund their retirement. This is one of the major decisions of anyone’s working life, so it needs to be right. There are some simple calculations that relate the business’s future profitability, to it’s possible sale value, and the amount of pension income that will be generated. CMC can help you with this calculation and help focus the owners mind on how successfully building the business can deliver the right level of cash for the owner’s eventual retirement.

Conclusion

Setting a long term plan and formulating an exit strategy will deliver benefits for any business. CMC have over 25 years of working with business owners to produce an exit plan and go on to a successful exit – call us now for a free initial consultation. Meanwhile, you may be interested in requested this FREE checklist on How to improve your chances of a successful exit

CONTACT US


Related posts