As much as we don’t like to dwell on it every day, each business journey, every story, has a logical endpoint. Whether 25 years from now or five, the time will come when you’ll want to disengage from your role as business owner and director.
This may mean retiring from work altogether, handing the business over to long-term colleagues or children, or even embarking on a new career. An exit strategy is the means of achieving this in a way that does justice to the legacy of your business, your own career and retirement aspirations, and that looks after your employees, customers, and suppliers.
When to think about your exit strategy
The sooner that a business owner starts to think about an exit strategy, the easier and cleaner it is to implement, and the more options you’ll have. Running an SME is sometimes compared to riding a push bike downhill. It’s easy enough to get on board at the top of the hill, but getting off safely when the bike is in full headlong flight is another matter entirely.
In this article, we will outline the key strategic points you need to consider to ease the transition into retirement or your next venture with minimal disruption to you and your business.
Assessing the current position and value of your business
Most exit strategies involve the business owner selling their business or handing over control to new management. For this to work, you should begin by thoroughly scrutinising your business’s current financial health, growth potential, and market position. Important areas to consider include:
- Strengths and weaknesses: using a SWOT analysis or a similar method, identify areas where your business can be improved or where current vulnerabilities lie. This information can be invaluable when negotiating a sale or preparing for a transition in the near to long term.
- Business valuation: it’s worth reviewing your assets, turnover, and sales ledger to gain an understanding of your business’s current worth, and how this compares with other businesses on the market. You can do this informally, or through a formal valuation service.
- Financial stability: often, it isn’t businesses with the most valuable hard assets or intellectual property that go for the highest amount, but those with the strongest financial foundations and the potential for future expansion. As part of your valuation process, analyse your cash flow cycles, any debts or creditors, and regular expenses in order to set realistic financial goals for your transition.
Defining your goals and objectives
It isn’t unusual for business owners to come away disappointed with the current position and value of their business. That’s okay. Your current position is just the starting point, and with a clear understanding of your company’s current financial and operational health, you can move towards defining your exit goals, and where you need to be to achieve them.
Regardless of your long-term aspirations for your business, it makes sense to maximise its financial and market value as much as possible in the years leading up to your exit date. There are several ways you can do this, including by investing in property and intellectual assets, including your own in-house software, employing skilled staff, developing a stable and varied customer base, and clearing any business debts you may have accumulated.
Develop your succession plan
When you shut down your computer and say goodbye to your team for the last time as business owner and director, what happens next for your company? Formulating a crystal clear succession plan is vital to any successful exit, especially for family-owned businesses. Crucial steps to consider include identifying and developing potential successors from within or outside your business. This could, for example, involve grooming one or more of your senior partners or directors to one day take over the business in a management takeover, or inviting interest from outside investors or even a friendly competitor.
Establish a clear timeline for the handover to give yourself and your successors time to implement the necessary training and mentoring to successfully run the business after your exit. This will involve outlining roles and responsibilities post transition to avoid confusion or loss of momentum, and deciding whether or not you want to a complete clean break, or if you intend to retain involvement as an adviser or consultant after your formal departure as director.
Support implementing your exit strategy
At JDR, we help business owners develop their enterprises into the most successful and dynamic companies that they can possibly be, making full use of their digital marketing and sales strategies to grow and expand in a way that maximises their market potential. So, whether you are just setting out on your business journey or already have an eye on the future, we can help you build a strong and lucrative business legacy to pass on to your chosen successors or sell at a great price to fund your retirement. To find out more, please get in touch today by clicking here.
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