You’ve worked hard to build your business but what will you do when the time comes to leave?
The right exit strategy can help you realise the value you’ve built, and should be in place from the day you start your business. Sadly, though, a good exit strategy is uncommon among small-business owners; according to the Commonwealth Bank local business owner report, only 47% of small-business owners have an exit strategy, and of those 22% simply intend to close their doors and walk away.
There are a number of options for exiting your business when the time comes, but you want to make sure that you are choosing the best option for you and your business. When thinking about your exit strategy, remember – failing to plan is often the same as planning to fail.
If you want to build a saleable business, you have to plan ahead, and the best time to start planning for sale is the day you start your business. If you create a business that is solely dependent on you, then when the time comes, you will find you have nothing to sell.
Put people and systems in place from the outset so that your business can run independently. When thinking about building a business, putting a manager in place or taking on a partner can make a huge difference to the saleability of that business down the track.
By handing key responsibilities to a manager, you can either focus on other business interests or retire when the time comes, while still having the ability to step in if needed. Taking on a partner in a business can bring new ideas and additional capital, and allow you to step away from the business with the confidence that it is in good hands. Just ensure that written agreements are in place from the outset, setting out the terms in which one partner can buy the other out.
As soon as you start planning and executing your chosen strategy, start to put systems in place. Create a business model that is not reliant on your presence in the business. Start to train your staff on all aspects of the business so that they could easily continue to work without disruption if a new owner was to step in.
Your aim is to put key elements in place that will increase the value of the business. You should be looking at any areas that increase efficiency, revenue and profitability or decrease your risks and costs.
Start by putting a strong management team in place including positions such as CFO, COO and HR Manager. This will ensure smooth and efficient running of the business and a much simpler transition for a new owner.
Next, start working on your systems and procedures. Ensure you have an employee manual including detailed job descriptions and responsibilities, a user-friendly CRM system and documented sales and marketing procedures in place. This will help to support the management team and provide transparency for a potential buyer.
When you start on the financials of the business, make sure the books are in order. Get a professional accounting audit done and then implement any changes or recommendations that come as result of it. This will include looking at your expenses, invoicing system, payroll and cashflow management.
It is also a good idea to get a business audit done, which covers the aspects of the company other than financials, such as sales, marketing, customer relations, internal operations, management etc. The key here is ensuring that you follow through once the audit is completed and make the necessary changes as recommended by the auditor.
Once you feel that the business is approaching a position of saleability, if that is your chosen exit strategy, start networking with business owners, business brokers and other potential buyers. A good place to start is your local chamber of commerce or business networking groups and associations.
Sarah Savvas, Profit Works