Business Exit Strategies – Start Today
When should you and other business owners start to plan your Business Exit Strategies? Possibly sometime ago, but today would be better than next week!
Most entrepreneurs start their business with a good idea of how they would like it to develop and what it will look like as it changes over the course of time. Whether the vision covers months or years into the future is down to the individual. But the truth is that very few have a definite vision of how the end will look. But this may be the most important, most profitable/expensive decision that the business owner ever makes for themselves, their family and the business.
Who can plan for the future?
There are some businesses, where the business is so dependant upon one person that there is little chance of any residual value and the exit plan will effectively be to extract maximum value from the business over the it’s lifetime. However, even in this situation it is likely that a decent customer list will have value to someone. If this is your business, then you should already be well into maximising the value of your work and preparing for the future.
For most businesses, however there is a definite opportunity to sell to one of a number of interested parties, when the time is right. Businesses for sale will attract a variety interested parties. In the main these will be trade sales of some type, either competitors, suppliers or customers. But you should not discount your existing management, extended family, entrepreneurs looking for a new opportunity and anyone else.
Your plan does not need to be set for when you are 65 or any other date unless that is what you have special circumstances, but bare in mind that the time may not be the best time, so some flexibility needs to be built in. The best plan will have your business primed and ready for the roll out at the opportune moment.
How long will it take?
In an ideal world, you would have started to develop you business with a view to how you will step down from the start, but for a reasonable sized business it is likely to take at least twelve months to get all the pieces of the jigsaw in place and perhaps longer to make yourself dispensable and be able to produce accurate management information at the drop of a hat. There will be a considerable investment in time and some money to make sure that you maximise your final pay day from your business.
What’s the worst that could happen?
Lack of planning can mean that if the end suddenly appears out of the blue, there could be only one exit strategy, closing the doors and loosing the value that had been built up over the years.
This happened to a friend of mine, who had been building his business for around 10 years. One year, just before Christmas, he had a bit of a cold so he went to bed early. Unfortunately, the cold developed into something much more serious and he was rushed into hospital where he stayed for nearly 6 months. His wife, who did not work for the business, tried to keep the firm running, but by the end of January, only six weeks later, she had to take the decision to close the operation down and make all of the staff redundant. All those years of hard work and money invested were wiped out in around 40 days.
It is certainly difficult for smaller businesses to plan for a lynch pin of the organisation to taken out with no notice. But whilst planning for the future, you should be looking to strengthen the core of the business to buy some time to exit with the maximum value possible.
So the ideal time to start planning your exit from your current venture is probably now!
If you would like to receive our FREE guide to Exit Strategies to be published in March 2012 “7 KEY STEPS OF EXIT PLANNING” click on the following link with title 7 KEY STEPS: firstname.lastname@example.org
Alternatively, if you would like to discuss your situation, please call Brian Russell FCA on 01661 872004
Brian Russell FCA is a Chartered Accountant specialising in advising small and family run businesses on how to maximise their returns when exiting their business or handing it on to the next generation.