Long-term planning is key for any business, and having an exit strategy within those plans is a must. This applies even if your business is in its infancy. After all, everyone wants to retire quite comfortably.
An exit strategy is your way of leaving the business and doing so in a profitable manner. But how do you go about this? These four steps should make life easier.
1. Always plan well ahead
First, you must plan your exit strategy from the outset. This helps shape the way your business unfolds. There will be a day when you plan to stop running the business. It’s better to leave the business voluntarily, rather than an exit being forced upon you, and preparation is important.
Some experts believe you should start planning years before you actually leave the business, while other business owners insert it into their original business plan. It's important to know when you will leave the business, the path your business will follow to get to that point and whether your idea is to sell or pass the business to someone else.
2. Consider the negatives
This isn’t easy, but you must also plan for bad things to happen. It’s a fact of life that an unfortunate event can occur. Whether it's an illness, a death or even a natural disaster, you need to think about every scenario. Nobody knows what lies around the corner.
The best approach is to have various business insurance policies in place should an exit strategy be forced upon you. What would happen if your location was destroyed by fire? What if an integral member of your team became ill or died?
Preparaing for these events helps prevent you from losing everything. Study your insurance policies or seek advice regarding the different clauses. Look at policies where business debt is covered should something bad occur or polices that allow you to exit the business without being left in trouble. With luck, you never use it, but knowing it’s there is good planning.
3. Be aware of new owners
You should also become aware of the potential new owners of your business as part of your exit strategy. Again, this helps you determine the direction your business will head in. Your aim is to reach a point where you can move the organization under someone else's control.
Generally, there are three options available.
First, you may wish to pass the business to someone in your family. Identify who will inherit the business, and check that they want to do it. Discovering that nobody has an interest in taking over the operation can be devastating if you're unaware until you start seeking an exit.
A second option is to sell the business to people within the company. This may be to an individual or a group, and the good thing about this option is they already have the expertise to take the business forward. Of course, you must know who will take over and prepare them for it in advance.
The final option is to sell to an outside party. With this, you want to know their plans for the business before agreeing to the sale. Also, identify the party with time before the sale, as you want to avoid a rushed affair. You don’t want to sell to the wrong person.
4. Get the best value
If your exit strategy is to sell, offering the best value for your business is key. Much like buying a luxury car, you must look beyond the sales figures and make your business an attractive proposition, even if the goal is selling the business to current staff members. Remember, current staff members may understand their section of the business, but they will not know about every aspect of running the company.
The company's value should include a healthy income, having a variety of clients, a low staff turnover, a detailed management structure and a host of other factors. Your business must appear to be a well-oiled machine where a potential new buyer can move in and keep things running with only minor adjustments.
If your business offers real potential, then finding a buyer is easy. Of course, you must build your business in the right manner to get to that point.
Having an exit strategy in place is something all business owners need. Seeing the end goal and continually working toward it can give you the drive you need to succeed. Being unprepared increases the chances of a disastrous exit, which may cause you to lose everything, and that is a crying shame. Plan ahead to enjoy your retirement after putting in the hard work to build up your empire.