Value Builder – How it helps you and your exit strategy.
10 Tips to create a business exit strategy
An exit strategy is a plan for exiting a business. Typically, for most businesses, the term means preparing the company for a change of ownership. A well-planned exit strategy allows you to obtain a higher sale price than you usually would while ensuring the business continues to thrive without you. Succession planning is also called succession planning. What does the research involve?
- Succession planning objectives and goals.
The focus is to leave your business in the best possible shape for your eventual sale. It means that it should be running at peak performance, the books should be clean, and all of the processes and procedures should be documented so a stranger can take over. By the time the business is done with you, you won’t matter to them anymore.
It takes a long time to do all this. That’s why starting a succession plan can never be too soon nor calculating an exit strategy.
- How to sell an existing business.
Business advisors and brokers recommend this nine-step process to ensure a smooth transition for a business’s succession plan.
Select a target audience – There are different sales requirements for different clients. When it comes to family things, do everything transparently and equally. You want the transaction to be harmonious and secure, not contentious. If you are selling to staff, consider offering staggered installments. They will probably require a deposit before paying the rest from their business income. If you sell to the highest bidder, then get all your records in order as otherwise, they won’t have any idea how you operate or what sort of money you make.
Decide on how fast you have to go – Some buyers, such as family, may need to agree to purchase the business in stages. You could be a part of the company for a while or even try to protect the investment you made. If that’s the case, then you need to discuss your consulting fees. If you want to break free of your old employer, you have to sell your business on the open market.
- Organize your accounting.
Smart Buyers will ask to see at least two years’ worth of financial records showing long-term successes. If your accounting is inaccurate, get it fixed now. And if you can do anything to increase your profitability, do it immediately. You want to show a good, consistent pattern in your accounts rather than a sudden upturn.
- Make yourself useless.
There will be no business for you to run if it cannot exist without you. If you have employees, provide them with the training and leadership they need to operate effectively. Establish less involvement. Become less reachable for clients and customers. Delegate big decisions. Go to work less frequently.
- Ensure your business functions at optimal levels.
To have effective and efficient processes is paramount. About what, when, and how? Make sure there are guidelines to be followed for all this. Potential buyers expect businesses to control specific tasks in a certain way.
- State how everything in your business works.
Write a comprehensive “how-to” manual for your business so that anyone could run the company tomorrow. Record every step or every part. Remember to follow the various actions you take to complete each of these tasks. While you’re at it, consider drafting a job description for each employee. And create a process for repeating tasks that are common in your business.
- Develop a strategy on how to raise the value of your small business
What do you believe makes your business the best? I have a highly desirable product. Loyal clients. Noteworthy intellectual property? Build your business up and make it stronger so that it becomes even more valuable. Identify the biggest holdbacks and address them. You’ll need an outsider to evaluate the business. Seek your accountant’s advice. If the candidate doesn’t have the necessary skills, they may recommend someone who does.
- Obtain a business valuation.
You will not know what you will receive at the time of sale truly until the day it is sold. However, you can obtain a rough estimate. Consult with a professional. You should find a professional local business broker, or you could search the internet for local business brokers. A guideline valuation will provide a reasonable estimate of your actual property value. If their prediction is too low, you may delay exiting and consider building value in the business.
- Work on writing a sales pitch.
Prospective buyers need to be excited by your business, so develop a short summary that clearly highlights your strengths. Write a comprehensive account of what got you started, how you’ve grown, and what you’ve achieved. Present a positive (but honest) picture of the future, but keep it realistic. Include essential statistics and facts that support your argument.
- Exits occur.
Facing a business exit is inevitable. It will happen irrespective of your control of it. Put in place a plan now, and make the plan self-sufficient in the next owner. It will help you command a better price and increase your chance of survival.
And remember that anything you do which will benefit a potential buyer will also be good for you. You’ll be more efficient and profitable while also having fewer problems.