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How to make an exit strategy for your business

Selling a business is not an easy task and will need careful planning- I had always been told that when you start your business and you are looking at your five year plan then ensure that you have included an exit route. By doing this you will have a plan that will clearly map out the direction your business will be taking in the future.

Planning a successful exit strategy requires careful consideration, and can be a big challenge if you’re not prepared. Take a look at this helpful ten-point check-list to make sure you have all of your bases covered, and this transition can be made as seamlessly as possible,

Prepare management and staff

It is important to be upfront with your employees about the future of the business and their positions. Rally the troops and motivate everybody to work as a team, giving their best effort to make sure everything is well handled, under control and profitable to attract the right kind of buyer.

Financials

Make sure there are well organised and documented financial records for the business, as prospective buyers will want to see this information to assess the viability and potential of the business. Interested parties will want to see figures on every aspect of the business, including payroll, overhead, profits, expenses and anything else that affects the financial health of the business.

Timeline

Making the decision to sell is not a spontaneous one, and most successful exit strategies are based on a three to a ten-year timeline. Finding the right buyer, and successfully changing ownership of a business is a lengthy process, so prepare accordingly.

Business model

It is important for your company to be operating under a well functioning business model executed by a strong management team. This will make the business is as profitable as possible, making it appealing to potential buyers.

The industry

What the industry is doing at the time of sale greatly affects the attraction of buyer to a business, as well as its value. If the industry is flourishing it is likely an ideal time to sell, as the value will be higher and the business will be considered a more desirable venture.

The M&A climate

A business will fetch a higher price if sold at a time when the mergers and acquisition climate is favourable. When investors cannot find stocks to offer sufficient returns on their money, the business sector becomes more appealing, and there will be more potential buyers.

Valuation

It is critical to have your business properly valued when considering selling. There are many factors that work together to determine a company’s worth, including assets, debts, intellectual property, and equipment for starters. The valuation of a company can vary greatly from year to year so it is important to revisit this regularly, and look for a second opinion from time to time.

Advisory

Before approaching something as important as selling a business it is important to assemble a group of people to advise and guide you through the process. You will need advice in regards to legal paperwork, accounting, supplier relations and professionals of that nature. Building a successful group of experts to rely on isn’t easy, and does take some time to do.

Succession planning

A good succession plan will allow a business to transition to a new owner as smoothly as possible. Your succession plan needs to cover such areas as training, skills gaps, how the transition will be made and how long it will take.

A knowledgeable professional

There are many professionals that can carry out your exit strategy successfully, and it is wise to consider using one to help you navigate the situation. A reputable business broker, who specialises in buying and selling businesses,can be a great resource when selling, saving much time and confusion.