Preferably, you should start your business with the end goal in mind and develop an exit strategy from the start.
If this is not the case, your exit strategy should begin two to three years before the business is sold.
It takes time to deliver your exit strategy, which is why you should start early. You must incorporate both personal and financial goals into your strategy, with tax and estate planning being critical.
To effectively complete your objectives, you must incorporate a wealth management plan into your exit strategy. This will assist you in meeting your exit objectives for both yourself and those who rely on the sale (i.e shareholders).
Another factor to consider when developing an exit strategy is how involved you want to be in the business after the sale. Do you want to be completely removed from the situation? Or will there be a consulting or earn-out phase for a set period of time? You could also be a chairperson with a continuing stake in the company.
Another factor to consider when developing an exit strategy is how involved you want to be in the business after the sale. Do you want to be completely removed from the situation? Or will there be a consulting or earn-out phase for a set period of time? You could also be a chairperson with a continuing stake in the company.
The sooner you begin planning for exit, the easier it will be to make calculated decisions that benefit both you and the business.
Understand the business’s value
After you’ve created a road map for your exit strategy, you must assign a monetary value to the company. From their experience, a good business broker will always provide an indication of the range of valuation they would expect to achieve in the market. An external Finance Director can also provide a second opinion. In either case, their expertise can assist you in defining the true value of your company and what you hope to achieve through exit.
Options are essential during an exit strategy because they allow you to adapt to changing scenarios as your exit unfolds. Knowing the worth of your company gives you options because it creates attainable and tangible goals for your company. Then you can consider your various options for reaching these goals.
Determine what you want your legacy to be
Most business owners have a personal attachment to their company, whether it’s because of the years of hard work they’ve put in to build it from the ground up or because it’s given them and their families a better life. This is why it is critical to include in your exit strategy your desired legacy at the company.
To avoid late-day stress and poor financial decisions, plan out, at least for yourself, what you intend to do with the proceeds. Do you want to give a bonus from some of the sale proceeds to some of your employees?
To avoid late-day stress and poor financial decisions, plan out, at least for yourself, what you intend to do with the proceeds. Do you want to give some of your company’s employees a bonus from the sale’s proceeds? Or should you share some of your wealth with family and friends?
You could also donate some of the proceeds to a future project or charity that you support. Whatever you decide, it is always useful to keep the question “how do I want to be remembered”‘ in the back of your mind to better understand the steps you intend to take to achieve that desired legacy.
Make sure you have a succession plan in place
During the development of your exit strategy, you should address the question of “what is the succession plan?” You may have a natural replacement within your company, in which case planning would be simple.
If you do not have an immediate candidate in mind, it is critical to plan ahead of time for a thorough process to find the right successor or successors. This relates to what was previously stated about legacy, in that it is critical that the business is left in good hands because it will be remembered that you were in charge of appointing them.
Before selling your business, complete the above steps first.
When deciding to exit a business, it is natural to immediately consider selling it. However, in order to maximise the value of your company and profits from the sale, you must follow the steps outlined in this article.
To make your exit as efficient and profitable as possible while leaving the best legacy possible, you must first develop a focused exit strategy before selling.
For help with your exit strategy, get in touch with Yorkshire Change Consultants – UK M&A Change Management consultants who specialise in helping you buy or sell your business.