Planning a Business Exit Strategy

An exit strategy is a contingency plan for a person to exit a business in the event that it meets a substantial profit, or becomes no longer profitable.

Whether you have inherited a family business, bought your company, or built it step by step from the ground up, there may come a time when your journey with your company has reached an end. That is why our business accountants have prepared this handy guide for planning your business exit strategy.

How to Plan Your Business Exit Strategy

  1. Clarify your objectives
  2. Work out who is your ideal buyer
  3. Work out what your buyer wants
  4. Demonstrate your business’ value
  5. Include important advisory staff in the process

What is a Business Exit?

The term business exit refers to the time in the life cycle of your business when it is in your best interest to step away from the company. Well-orchestrated business exit planning puts you in the position to reap the rewards of the years you have spent hard at work. Additionally, you will be able to embrace new opportunities which may have eluded you without proper exit planning.

Reasons You May Decide to Leave Your Business

The reasons you may want to move on from your business are varied. Some of the most common reasons an owner decides to move on include:

  • Uncertainty in the Market – The market varies as a matter of course, but sometimes changes go beyond. Occurrences such as regulation changes, loss of a critical customer demographic, or new competitors in the market may cause a business owner to exit.
  • Significant Life Changes – Perhaps, you have reached a point where you can afford to step away from the grind and want to focus your energy elsewhere. A crisis such as you or a family member receiving a devastating medical diagnosis or you are permanently relocating for personal reasons are also catalysts of business exits.
  • Exhaustion – Many hard-working business owners reach a point where stepping away is necessary to protect their well-being.

Steps to Your Business Exit Planning

Even if you have no intention of exiting your business anytime soon, take the time for business exit planning now. This is the best way to ensure you are set when the time comes, and you will not need to scramble for business exit solutions. There are a few steps that are essential for business exit planning.

1. Clarify Your Objectives

Having clear goals will help you to stay motivated throughout the process and help create effective plans. You should ask yourself a few vital questions during this phase.

  • When would you like to exit?
  • Will your exit be total, or will you maintain some part in the company?
  • Would you like to be an advisor, director, or consultant in the business?
  • What capital return do you want?
  • Are there specific types of people you want or do not want to own the business? (For example, if your business is sourcing sustainable and responsibly produced textiles, you may not want a company well known for ravaging the Amazon Rainforest to purchase and run your business.)
  • Do you have any concerns about the people or the company after you leave?

2. Who is Your Ideal Buyer

Most business owners planning their exit would say their ideal buyer is an entity that is capable of delivering their objectives. While you do not want to limit yourself to buying options, a specific range of businesses can produce results faster. You may discover there is a sizeable pool of potential buyers to consider:

  • a client
  • a competitor
  • a private equity firm
  • a related business in your area
  • a supplier
  • your current management team

When you’re preparing your exit strategy, you should consider all of the possible outcomes, and make contingency plans accordingly.

3. Things Your Buyer Will Want

Not all buyers will focus on the exact details when they consider purchasing a business. Some specifics that may interest buyers include:

  • a loyal and/or diversified customer base
  • a sensible corporate structure
  • industry-leading systems and processes
  • industry reputation or brand recognition
  • low exposure to trading and/or contractual risks
  • possession of hard-to-acquire assets
  • strong cash flow

4. Creating Value

Making sure your business has and demonstrates value is a significant part of the exit strategy. The concept of value differs slightly between individuals. It is important to tick the boxes of several types of potential buyers.

Offer two or three years’ worth of various case studies to highlight how well you and your staff manage specific situations. A collection of facts that may help sway a buyer is a compilation of customer reviews and your company, its employees, products, and services.

5. Include Important Advisory Staff in the Planning Stages

A few examples of staff you may want to have on board include:

  • An Accountant
  • A Tax Specialist Advisor
  • A Commercial Lawyer

Contact Us

No matter what stage you are at with your business, it is not too late (or early) to create an exit strategy. At M2 Corporate, our experts have helped hundreds of owners find the best business exit solutions, leaving them secure in their futures.

Do not get caught in the trap that you have plenty of time and can work out your business exit planning later. The sooner you have your business exit in place, the smoother the transition, and the less you will need to worry about later.

Mace Turco

Mace Turco

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Mace has always had a passion for business, and he loves working with clients who are driven and have ambitious business goals. His qualifications include an AIPA from the Institute of Public Accountants and a Bachelor of Commerce from The University of Western Australia for Corporate Finance and Financial Accounting. In 2020 Mace was awarded the 30under30 Award in the Business Advisory Category, a National Award hosted by Accountants Daily.