Do you know your Exit Plan?
This year, like most years, the media has played a significant part on what is going on in the world around us, from local to national scales. As each person has their own values and interests, some topics will resonate or strike a chord with us, more than others.
For me, personally, media reports of businesses choosing to close down or exit instead of re-opening once restrictions have lifted has really stuck in my mind. Sadly, COVID has flattened many business’ operations and has led to some business owners turning the key to lock up their doors, rather than to reopen, or in some cases, they are handing over the keys entirely.
While our circumstance today is not our ‘usual’, (10 points to anyone who can tell me what the new usual will be!), it’s always good to take time out and think about your exit strategy.
I can clearly remember sitting with my business partner, celebrating our 10th anniversary of our business and asking, “can you think of a day when you wake up and not race to your computer to chat with our overseas team?”, or “can you imagine your life after…”. We both knew business was starting to change and we knew we needed to change with it. What we didn’t think about was if the change was going to happen, what would it look like if our business was no longer there.
Exiting your business is emotional. Thinking strategically whilst in an emotional state is a skill most of us don’t possess. Better to learn this information now, than in hindsight a couple months or years down the track. When planning your business’ exit strategy, allow for a minimum of 6 – 12 months for the best possible outcome.
You’ll exit your business the same what you started it, with a conversation. This side of the road may be a little harder, so here are some conversation points or ideas to get the ball rolling.
- What is the strategy for selling your business?
- Are you part selling or transitioning ownership?
- Does your strategy align with your person values and objectives?
- Where would your buyer find value in your business?
- What factors can enhance or hinder your value?
- Can the business respond quickly to market conditions to maximise price – is it deal ready?
As someone who has been down this path from start to finish, here are my top five tips in preparation to exit your business.
1. Know your buyer
Identify who your target buyer is, and how they would assess your business’ value. If it helps, create your ideal buyer in your mind and outline every dimension possible; business background, education, location, lifestyle factors, communication style, etc. Although this exact ‘person’ may not buy your business, it will help you work out who your targeting your future deal towards and maximise value
2. Make yourself redundant
If you are the key person(s) running the business, you need to step away. This could mean hiring a strong CEO/GM. Documenting your business processes and handing over the running of your business to your management team for at least a year prior to sale. This will give a future buyer comfort the business will not fail without you.
3. Pay for some housekeeping
Invest in your business. Makes sure it looks and functions professionally with accurate, clean financial reporting and accounting. Clean financial accounting means that your personal affairs are separate from the business’. Having your books up to date and compliant will also save you any future stress or headaches when it’s time to start to negotiate a deal.
4. Leave something for the next person
Buyers will pay more if there are opportunities for future growth. Just because you are finishing up your chapter in this book, doesn’t mean the novel is finished.
5. Timing is everything, be prepared
Get your business in a sale-ready condition as early as possible so you can respond quickly to changes in the market.
Two years after having that first conversation with my business partner, we celebrated the sale of our business. Were we totally prepared? Probably not. Did we learn a lot? (Heck) Yes. Would be do it all again? In a heartbeat. Its nearly been five years since we sold our business and we’re itching to take on the journey again.
We’re both aware that change is in the air, and we’re not talking about the fast approaching spring hay fever! It’s time to have that conversation again… What’s going to make me spring out of bed, on the coldest mornings or the warmest nights? Where is our next gap in the market that is going to serve our community and allow us to give back? How can we better the lives of other professionals in our industry and challenge them to surpass their goals?
Steps 2 Success was formed out of these questions.
Remember once a business owner, always a business owner…