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What is a business exit strategy?

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How to develop an exit plan for your business

A business exit strategy is a formulated plan to exit from a business, such as through a business sale. Business exit strategies are often planned well in advance to guarantee a seamless transition between owners, to steady the future of the business, to maximise value and to secure a competitive sale price for the business.

The process will often begin with a planning meeting to explore various business exit strategies, including a business sale. The vision for the future of the business will be discussed and the routes through which this can be best achieved.

How to exit a business

There are many routes through which you can exit a business that include to:

-      Sell a business

-       Pass on a family business to a successor

-       Plan a management buyout

-       Merge

-       Close a business

The options are varied and will depend on what the business owner wishes to gain out of their exit, for example, to generate a return from their investment, relieve themselves of their responsibilities, or secure a prosperous future for the business under the hands of a skilful successor.

If a business owner wishes to exit from the business by a particular date, for example, due to retirement, the business exit strategy will be tailored around this timeframe, and planning will commence well ahead of this date, often years.

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What does business exit planning entail?

A strategic business exit plan requires advance planning so that the business is optimally positioned when it is brought to market. The business owner will often confide in a professional advisor, such as a business transfer agent for their expertise and understanding of how to best maximise value upon their exit from the business.

Preparation – As there’s a wealth of time to flesh out each stage of the business exit journey, advance preparation is key. Finetune the business so that it’s in the best form when it is valued and goes to market.

Transfer expertise - During this period, you’ll need to prepare to transfer your knowledge, skills, and expertise to your successor, or preserve this in written form, similar to a handover.

Plan transition - You’ll need to brace customers for the transition if this is likely to create waves in the public sphere. Plan media coverage so that the announcement is controlled and follows that made to company employees.

Housekeeping - Get the affairs of the business up to date, such as outstanding invoices, accounting records, accreditations, and license renewals. Streamline company finances and reviews outgoings so that the business is operating in an efficient manner.

Maximise value – The valuation of the business can be used as a benchmark against similar businesses that have sold. This is known as comparable sales data which your business transfer agent will have access to and share industry insights on. Polish the business to raise its value and generate a worthwhile investment.

Business valuation – Arrange to value the business to calculate its market value. This will show how much the business is worth in today’s marketplace, how much buyers are willing to pay and to help determine a suitable sale price for the business.

If you wish to conduct a business exit strategy review, get in touch with a business transfer agent at Selling My Business. We work with business owners to plan future business sales with a view to maximise value and achieve the best price possible.

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