1. Make an exit plan
Business owners will often say their business is their pension without any real plan in place, just a vague notion of selling their business at some point in the future.
Your business will be undervalued unless you carefully plan well in advance for exit and the process of due diligence and put in place all the things that will help with the value of the business; leave your planning too close to exit and you’re in danger of holding a fire sale or more likely failing to sell at all.
Important questions to ask yourself include: what timescale is involved? What’s the value of the business? Have I put support and a succession plan in place? How am I going to market the company for sale?
2. Get financial planning pinned down
Your business is likely to be the biggest asset you’ll ever own, so it pays to be sure you know exactly what’s happening with your money when you exit.
It needs to come out tax-efficiently and be invested in the right way, because it’s going to fuel your future.
Ideally, you should be planning at least two or three years ahead of your intended exit and, importantly, calculate how much you need to come away with to give you the lifestyle you want. You clearly need to understand the financial picture that will make your business attractive to acquirers and their advisors.
You’ll need to keep the growth curve going and keep the business lean and fit for sale to maintain its attractiveness and value.
3. Appoint expert advisers
To prepare the business for sale and successfully exit, you need a team of advisers including an expert solicitor, people who understand tax and corporate finance, and an accountant, to market the business and provide sound advice on due diligence.
Unfortunately, a lot of businesses still prefer to use their own familiar professionals, but qualified, proven experts in these specialised fields are needed to extract the maximum value from your exit.
While, on the face of it, this expertise may appear expensive, the return on investment of a successful, tax-efficient sale makes this decision a no brainer.
4. Ensure the business isn’t disrupted and continues to deliver
An exit is a lengthy, disruptive process, especially when it comes to the due diligence. You’ll be asked to perform tasks and gather information for someone who is looking for weakness to knock the price down.
So, you cannot take your eye off the day-to-day running of the business and risk losing sales as your asset could drop in value or you might even lose the sale altogether.
Leaving the demands of exit work to your appointed advisers, gives a level of separation so you can focus on keeping the business in shape.
5. Put a succession plan in place
Having a succession plan enables you to walk away when the exit deal is done by putting a team in place to run the business effectively without you.
A buyer may want to tie you in to the business for an agreed length of time to benefit from your relationships and experience, making the balancing payment when you leave.
You might be offered incentives to stay, but sometimes entrepreneurs struggle working for someone else and leave without the balancing payment.
If you want to walk without devaluing your enterprise, ensure you’ve put an effective management team in place to deliver business with continuity beyond your tenure.
*Exit strategies may include the referral to a service that is separate and distinct to those offered by St. James’s Place.
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.