The importance of having an exit plan
Establishing an exit plan early on in the life of your business is crucial if you’re to extract the highest value from your investment of time and money. Exit plans are not static documents, however - they’re fluid, and should be reviewed as the company evolves.
This ensures that plans remain achievable and provides the best chance of securing the highest return on sale, whether the business is intended to provide an income until retirement, or you intend to sell your company sooner rather than later.
So why develop an exit plan? Here are just a few reasons why exit planning should be a constant focus throughout the life of your business.
- Exit planning offers you control
Although your intention may not be to sell in the near future, unexpected offers to purchase your business could change your mind. If you’re making profits that are higher than anticipated, already know and understand the value of your business, and the offer is a good one, you’ll be able to make an informed decision on whether or not to sell at that time.
- You can proactively develop the business with the future in mind
Planning strategically helps you decide what you want to achieve from being in business. It allows you to choose and secure the best types of finance, and demonstrate to lenders that you’re a risk worth taking.
- You need time to prepare
Selling a business is a complex process that requires considerable preparation time. You’ll want to improve your sales figures, streamline processes to encourage efficiency, and update technology, as they all help to present an attractive proposition to potential buyers.
- Plan for retirement and potential ill-health
An exit strategy should be a major part of your retirement plans, but is also crucial should you suffer ill-health at any point. It allows you to move quickly to sell the business if unexpected circumstances necessitate a rapid sale.
- Mitigate the risk of financial failure
Failing to establish an exit plan leaves you at risk of financial loss should the company fail, and need to be sold quickly. Changes in the market, or economy as a whole, can quickly and negatively change the long-term outlook for your business, leaving you unable to maximise its sale value if you don’t have an exit strategy.
The simplest of exit plans can boil down to knowing the value you require for the company, and the date by which you want to sell. But even this simplest of plans demands ongoing research and knowledge of the economy, your market in particular, and how the business is performing within it at any one time.
If you would like more information on exit planning that is tailored to your business, our professionals at Selling My Business can provide advice and guidance on developing and implementing your own exit strategy. Call one of the team for a free same-day consultation.