A crucial part of any business plan is the exit strategy. While being in business is an exciting chapter of life, no matter how wrapped up in it you are now, there will come a stage when you want to move on – or retire. The value you realise from your business is important in ensuring personal financial security and the comfortable lifestyle you deserve.
If you haven’t included an exit strategy in your start-up business plan, or you’ve taken over the running of a company, now is the time to make arrangements. You should also review and revise your exit plan on an annual basis.
If you are planning to sell or float your business, you will need to establish its value. This is a tricky equation and there’s no doubt that factors beyond your control (the economy and your specific markets) and an element of luck (a buyer or buyers coming forward wielding a decent sum) will play their part.
Elements to consider in this valuation – and available from your annual budget plan – should include the company’s forecast profits minus any exceptional costs following the sale of the business, the current sale value of any assets, growth prospects, supply and demand, and risk.
Achieving the best sales value, therefore, means planning ahead. Make sure your company is in a strong position by having in place robust management information systems. Reduce risk by diversifying your customer base and providing skilled members of staff with incentives to stay on board. Consider offering the business with a package that involves you staying on in a managerial or advisory capacity for a set period to maintain stability and direction. Finally, take a look at the economy and consider whether now really is a good time to sell.
You may not plan to sell your business, but to instead hand it on to a family member or another successor. If this is the case, involve them in the strategic, day-to-day running at the earliest opportunity. If there’s time, it may also be worth them spending time working within a similar business to broaden their experience and bring additional insight into the company. If you are handing on the company to someone you know, seek the advice of a third party, such as a business advisor, to ensure your perspective isn’t skewed by emotional connections.
Whatever you do, don’t put off making an exit plan because you are ‘too busy’ in the running of the company or don’t intend to leave for years. You never know what opportunities and changes – personal or work-orientated – might be around the next corner. Having an exit plan allows you the freedom to choose how you deal with these.