An exit strategy doesn’t necessarily mean you are looking to leave or sell your business. It can be this, but it can also act as a contingency plan. Having an exit strategy can keep your business moving, providing an income and keeping it viable in the unforeseeable event of the business owner not being able to manage it for a period of time, or even permanently.
With this in mind, the largest generation category of SME Business Owners in the UK is Baby Boomers. Typically, the youngest of the Baby Boomer generation are from the mid 1960’s putting the youngest of them into their mid 50’s. Many have been through several recessions now and the latest Covid–19 pandemic is for many, the last one they hope to work through. Many Baby Boomers are fast approaching retirement age, if they haven’t already. Many are also actively considering their retirement and what will happen to the business they have built up over many years and decades.
Why you need an exit strategy
Depending on which statistics you read, around 80% of the UK SME owners don’t have an exit strategy or succession plan in place. This can cause the business not to sell – around 100,000 companies per year just close as they are not able to sell. Having a clear and professional exit strategy in place has been proven to assist owners in getting better value for their company and enabling them to sell the business when the time comes.
Take time to prepare
To make a company viable to sell takes time and preparation. It is advisable to start putting an exit strategy or succession plan in place at least a few years before you are planning to sell. This will not only increase the value of your business, but it will give reassurance that the business will run and continue to provide an income should any unforeseeable events happen. It’s an insurance policy!
Creating a good exit strategy gives any potential buyer all the information they need about your business. It offers clear insight about the succession take-over of the company to gain a better valuation for the business.
There are more Baby Boomer owners then potential buyers from the up and coming generations to buy the business. This makes it a very competitive market. An exit strategy will show the advantages of buying an existing business, proving to your successor that they are acquiring not just a viable business, but they will gain:
- A customer base and the history of income
- A trained workforce
- Required licenses and permits
- Established vendor relationships and credit lines
- A plan for growth
The benefits of buying an existing business
Buying an existing company rather than starting your own would mean that you step into a position of respect within the business community rather than starting from scratch with many unknowns.
By owning your own company, you are in the position of making the decisions that affect your own future, as well as the futures of those you employ – you may well keep a number of individuals in their job, very important in these uncertain times.
As a member of the local business community you will be able to bring influence and bear on the issues that matter most to you and your employees.
Now is the time in any stage of a business to have a current exit strategy and succession plan in place. It will bring you peace of mind and give you added advantage when selling your company in this very competitive environment. For more information and an informal chat, contact your local CMC Business Advisor.