What is an Exit Strategy?
An exit strategy or “succession plan” is a plan for when you want to leave your business. Most entrepreneurs sell their business for a change of ownership. Executing a well thought out exit plan or strategy can significantly increase your sale price and ensure the business continues to run successfully after you have left. The aim of an exit plan or strategy is to leave the business in the best financial shape for the new owner to take over – you need to ensure all your financial records are up-to-date and all your processes are written down so that the new owner can run the business without any problems.
Define Your Future Goals
One of the most important elements of an exit strategy is a clear definition of what you want to achieve from your exit, for yourself, your heirs and your business. Goals need to be defined before deciding on the best strategy. It is crucial that every business owner understands how they will leave the business.
Ensure Your Business is Efficient
Potential buyers will want to see at least two years of solid and up-to-date accounting records, which means you need to ensure your bookkeeping is spick and span. Also, if there is something you can do to improve profits you need to take action as soon as possible – this can be done by identifying what the strengths are in your business and focus on growing them. In addition, any identified weaknesses need to be fixed.
Get a Business Valuation
It is difficult to know what you will get for your business until you come to sell it. However, it is always useful to get a rough estimate. Your accountant will be able to help you establish this and, once you have an estimate, it will help you set your goals for the future and you may want to spend time adding value to the business before you sell it.
Selling Your Business
A potential buyer needs to feel excited and passionate about your business – it is important to spend time working on your sales pitch explaining why you set up the business, how you have grown it and your achievements – they will also want to know about financials so it’s crucial that all your accounting and reporting is up-to-date and in order.
Choose a Buyer
There are different ways to sell your business including:-
- to family or a friend;
- to management and employees;
- to another business.
The above options need careful planning and consideration – we recommend working closely with your accountant who can help you achieve a successful exit plan. It is never too soon to plan your exit strategy – we can help you ensure you reach your goals and aspirations for the future. For further advice on exiting your business, please don’t hesitate to get in touch with the team on 0161 761 5231 or email theteam@horsfield-smith.co.uk.
