By Kevin Cook, Business Doctor for Cheshire.
As a company owner, your exit strategy is a key part of your business plan. After years of hard work to create a profitable company with a great reputation, when it’s time to retire and sell up, your exit strategy will allow its success to continue, putting it in the best shape and attract the right buyer.
You can design your exit strategy to fit your business, so start with how you envisage it continuing – for example you could:
- sell the business to an external buyer
- sell the business to someone in your company
- hand over a family business to the next generation
Next, attend to the things that will make your business viable without you.
Your staff, client and supplier relationships
Make sure your contacts want to do business with your company even without you there. You’ll have built up a strong company team and a good book of clients over the years. It’s important to try to make sure you don’t lose these people after you go.
Think about signing contracts with the owner (or owners) at least 12 months before you do exit to prepare the ground for your business to perform well with them at the helm.
During this time, you could introduce the new owner to your team, your key clients and people across your supply chain to strengthen working relationships. Perhaps demonstrate your business plans, discuss your achievements and challenges, and show how you overcame them and met your targets.
Clean up your business finances
Nobody wants to buy a business with bad debts, so making sure your finances are clean and sorted out is important. Think of this like getting ready to sell your house. You want the property to look its best to attract the best buyer and maximise its sale value. You should view your business in a similar way.
So, outstanding company debts should be paid off and all regular payments up-to-date on both sides – all money your clients owe paid off too.
Court your competitors
If you’re looking for an external buyer, you might consider selling to a key competitor. I know – you’ve spent years working hard to beat them, and selling to one might go against your instincts.
However, your main competitors in the market can actually know your company well, and it’s highly possible they respect what you have built. Try and take emotion out of your decision-making and think about what’s best for your business. Ultimately, you want to sell to those people who really value it, and your key competitors most likely will.
Take time and advice
Now I‘ve mentioned these points, it’s a good time to talk about when you need to start implementing your exit strategy.
Even if your business is doing well, it doesn’t necessarily mean it’s attractive to other buyers. It can take time to get your business into shape and ready for sale, so it’s wise to give yourself at least five years. This way, you’ll have the confidence that you’re going to get the best price, and that your legacy is sustainable.
Five years means you can explore all your options and you won’t rush into any decisions that you could later regret. It will give you the time to seek out advice and fully consider all its implications. It’s important to get advice when you put your exit strategy together – from your solicitor, or friends and family in business, or an accredited coach, consultant or adviser.
Remember, your exit strategy is just as important as all other stages of your business cycle to ensure it builds on your success and grows in value, even years after you’ve passed on the baton.
Kevin Cook, Business Doctor for Cheshire, has been a business coach for five years. Business Doctors was launched in 2004 by Rod Davies and Matt Levington to provide first class support that adds real value to small and medium-sized enterprises. To learn more visit Kevin’s profile page on the main Business Doctors website.