All Small Businesses Should Have an Exit Strategy

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Eighty per cent of small to medium sized companies put up for sale in the United Kingdom do not find a buyer. This is in large part due to lack of business exit planning. Why would an owner want to put in the time and effort to build a business and then not be able to capitalise on that effort when they choose or need to leave? Consider what happens to companies that do not find a buyer when their owner retires or is unable to carry on for health or other reasons. Often the company shuts down with loss of jobs, and often the work and employment go overseas. Not only are the owner and/or heirs losing out, so is the local community and economy.

Most owners who start a business are too preoccupied with operational issues to think about what their long-term objective might be. But if you don’t think about possible business exit strategies you may unwittingly be shutting out options. Having at least two and preferably more exit strategies in mind will help you craft strategy as circumstances change.

If the long-term plan is to sell your business and retire or engage in other activities; then you need to pay attention to building a business that will run without your participation. If you want your staff to take over the business, this is likely to require a long-term plan to enable them to progressively acquire ownership.

You need to think about factors that will drive valuation. What can you do to enhance profitability? If you own your premises, will they form part of the business sale? If you have been in business for a while, the premises may be worth more than the business operating within them. A move to newer, more cost-efficient premises may both improve the business profitability and leave you with another asset to sell.

You need to think about assembling the team of trusted professional advisers that you will need supporting you when the time to sell arrives. Markets go up and down, so try to be flexible in your thinking about the timing of a sale.

You need to recognise that circumstances outside your control may force a short term re-think. Just as you need to have lasting professional powers of attorney in place as an insurance, so you need business exit plans that can be activated if (for example) you or a business partner become too ill to continue working.

Remember the saying attributed to Seneca: “Luck is preparation waiting for Opportunity”.

I would be happy to chat with any business owner who would like some help to focus their thinking in this area.

By |2017-05-10T13:22:51+00:00May 10th, 2017|Business Exit Strategy, Business Start Ups, Small Business|

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