Most business owners are passionate about their businesses and love being involved in growing and developing their companies. At some point though you will need/want to exit your business, so you will need an exit strategy.
What’s one of those? An exit strategy is a plan that you put in place with the ultimate goal of removing yourself from the business, after all you are going to have to ‘retire’ at some point aren’t you? So, how do you put a plan together? The best place to start is with your end goal and then work backwards.
Step one – start with your exit date? Look ahead 5, 10 or 20 years in the future, or maybe less if you have left it a bit late. Having an exit date will help you to start to think about what you want to do with the business and what you will need to have in place to allow that to happen.
Step two – decide what you want to do with your business?
- Is a Management Buy Out (MBO) right for your business? If this is your exit plan then you need to think about the steps you’ll have to have in place in order to make it work. The starting point is to make sure you have a strong senior leadership team in place. Doing this will allow your team to gain valuable experience before they take over, and you’ll be on hand should they need advice. With the day to day tasks covered you’ll also be able to finalise your exit strategy in detail.
- Do your children wish to take over? Whilst this might be your preferred solution, my advice is not to let your heart rule your head. If they’re already working in the business and have a good working relationship with the team then this may be simple. If however they’re not involved how will you introduce them, after all for the business to continue to run successfully after you leave you need them to be able to build a good working relationship with the existing staff.
- Employ a general manager and keep the company. If you want to use your business as a possible pension pot this could be a good option. Taking on a general manager to do the day to day running of the company provides you with a safe pair of hands who can take the helm and relieve you of the day to day running of the business. You might wish to take on the role of Chairman or Non-Executive Director, providing guidance when required for which you might be paid a dividend.
- Sell and walk away. This may be the best option if you don’t have a anyone you can hand the business onto. It will still require you to have built up value in the business so that you can sell it. You can choose to use an intermediary to help you to get the best price. You may need to make changes to your business in order to get the best price.
Step three – how healthy is your business? Before you start making your plans it’s important to get an objective overview of how fit for purpose your business is. This will look at the four key areas of your business time, team, money and systems. You need to have this so that you can achieve the most value for your business.
This process will also help you to see which areas will need to be worked on in order to get you to where you want to be. Taking on a general manager will require there to be money in the business to pay their wages. If you’ve decided to sell the business then you’ll need to ensure you have something of value you can sell, this may be your client base and income/profit, perhaps intellectual property, maybe it’s machinery or a manufacturing process.
Step four – prepare your finances. You need to put together an accurate account of both your personal and professional finances. This will do 2 things, enable you to consider what you need to exit the business and provide you with the lifestyle you deserve and what potential value there is in your business. Thinking about this at the start of your planning process will help you to take the actions you need to take to increase or add value to the business.
Step five – develop your leadership team. If your plan is for there to be a management buyout or to put a General Manager in place to take over you’re going to need to ensure you have the right people in the right places to ensure a smooth handover. It’s never too early to start planning who you want in key roles. A strong Leadership Team is vital, you also need to start delegating elements of your role to them, this will also have the added benefit of enabling you to free up time to finalise your exit strategy.
Step six – speak to investors. The next step is for you to speak to your stakeholders and investors. You need to inform them of your wish to leave the business and outline the plan you have in order to achieve this. You’ll also need to provide them with an overview of how you expect to repay them.
Step seven – tell your employees. Once you’ve finalised your plans you’ll need to inform your employees. This is likely to be emotional on both sides and something that needs to be handled sensitively. It is vital that you prepare for any potential questions they might have.
Step eight – let your customers know. Again this is something that needs to be done in a thought-through and considered manner. If you’re stepping down then it’s important to ensure that you introduce your clients and customers to your replacement and reassure them that the business is set to continue in the same way as before. If you are going to be closing your business then thank them for their support over the years and if possible refer them on to other businesses or services who might be able to help them in the same way that you have.
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