Realise the Full Value of your Business with Exit Planning

Exit Planning

As a business owner you’ll reach a point when you wish (or need) to exit your business whether through a sale, a buy-out, or a planned succession. When this time comes the revenue from the transaction needs to match the financial requirements you need for your next venture be it retirement, a sabbatical or another business. So, what can you do to prepare?

Research by UBS Wealth Management shows that ‘48% of owner managers who plan to sell their business in the next 5 years had no formal exit strategy’.

If you don’t have a plan for maximising your business’ potential sale value, now’s the time to put one in place.  It will take time to prepare for a smooth process and rewarding outcome.

Don’t leave it until the last minute

A recent survey by Moore Stephens reports SMEs typically need 3 years to prepare for a sale. From that survey of 610,000 directors, 12% of small business owners are over 70 years old; and 21% are over 65 years old, indicating that many directors may be late in planning their exit.

As a previous business owner myself, I appreciate that it’s difficult to find the time to think about your exit plan when busy with everyday operations. However, developing an achievable exit strategy is an essential task to which too few owners give proper consideration.

What makes a good exit plan?

A good plan will set out steps to increase the value of your business, help you attract prospective purchasers, and get the best possible price.

Here are some key questions to ask yourself:

  • What are your retirement goals, and how much do you need to achieve them?
  • When would you like to exit from your business?
  • What is your preferred exit route?
  • What is your business worth today?
  • Have you identified the best ways to increase your business value?
  • Do you have a continuity plan to protect your business should you become seriously ill?

Key factors to increasing value in your business

A key element in exit planning is identifying factors that will increase the value of your business. Creating a timeline that plots value improvement strategies allows you to position yourself to exit your business at a time that suits you.

This helps you easily recognise how much your business needs to grow in value to meet your financial target within your timeframe.

Value improvements you could consider include:

  1. Good and improving cash flow
  2. Potential scalability
  3. Dependency on certain customers, employees, or suppliers
  4. Recurring and sustainable revenue
  5. The size of market share
  6. Customer satisfaction
  7. The business’ dependency on the business owner

The strength of the above factors will provide a focus on which areas to grow in your business and improve your chances of a successful sale, as well as facilitate planning and preparation for that sale.

If this is something you are considering in the near future and you would like to discuss your business and your options going forward, feel free to contact us via the form below.

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