A common question we get asked is “What is an exit plan and why do I need one?”

We find that most business owners are working away, growing their businesses, without ever thinking about what happens at the end?…

The end of what? You might be thinking…

Well, the end of your business’s life!

Realistically, there are only 4 ways you will exit a business:

1. You sell it – either a share sale, merger, acquisition or IPO
2. You pass it on – to a family member, as an example
3. You liquidate – or worse, file for bankruptcy.
4. You kick the bucket!

Thats it!

What we also find is that business owners are rarely prepared for any of the above.

This is why you need a comprehensive Exit Plan (or exit strategy) that prepares you AND the business for whenever you are ready to move on.

A well-crafted exit plan or strategy should include the following:

• a decision on what you will do with your business (sale/transfer to family etc)
• an end or sale date – which then determines your exit timeline
• up-to-date financial statements
• a plan for how you will remove yourself from the business
• a documented way for how your processes will run the business so it is autonomous
• a review across your legal obligations and insurances etc

Why go to all this hassle?…

Put simply, to protect you and the asset you’ve spent years building (your business), to lift the value, sell for more, and to have a plan in place should your family or employees need to take over if necessary.

Either way, having an Exit Plan makes good business sense.

Don’t have one? Don’t panic…

In my next blog, I’ll show you the perfect time to start creating your own.

Till then.

When selling a business, timing is everything….

Start by putting yourself in a buyer’s shoe…

Would your business be attractive to them? Does it run on its own? Are you (the business owner) working in the day-to-day, does it make a profit?

If you could picture yourself looking from the outside in, would it be a “no-brainer” to buy, or would you run for the hills?

This approach helps us to determine whether it’s the “right time” to sell or exit your business.  

If the business has seen strong sales & profit growth, runs with minimal effort from you, has well-documented systems and there’s room for growth in the market, then your timing is probably right.

If your business has seen little to no profit, you’re working 1,000 hours a week and everything relies on you, then it’s certainly time to plan ahead.

Therefore, the PERFECT time to start your Exit Plan is about 2 – 5 years away from when you would like to exit.

Why?…

This gives you enough of a ramp to build up sales, profit, people, systems and confidence, so that you can attract the right buyer and demand the best price at sale time.

Take a look at the diagram below, which illustrates what I mean:

As you can see, the sweet spot to start creating your exit plan is when you’re ready to remove yourself, build efficient systems, and keep growing sales & profits.

How do you know if you’re ready? Easy…

In my next blog, I’ll share a simple checklist you can use to find out whether its the right time to start Exit Planning for your future.

In the meantime, try thinking about where you might be along your business journey.

Till then,