Small businesses need an exit strategy

Many business owners spend years getting their business off the ground, developing their customer base, and striving to increase the business value in the marketplace. Ironically, these same owners often don’t develop a plan for getting their investment out of the business. No matter how great your entrepreneurial and management abilities, the day will come when you want to sell the business, turn it over to someone else, or simply shut it down. It makes sense to plan for that day.

Here are three key considerations when developing an exit strategy:

Know your business. How do you want to exit the business? Do you want to sell the firm or turn it over to family members or employees? How long do you plan to stay involved in day-to-day operations? How much money will you take out of the business for retirement or other ventures? How will you deal with relinquishing control to others? Thinking through the answers to these questions is key to a successful exit strategy.

Set up an advisory team. Whether you plan to sell the business or turn it over to others, it makes sense to get at least two professionals involved from the start: your solicitor and your accountant. An experienced business lawyer can guide you through the maze of requirements and factors surrounding due diligence, business sales, and estate planning. Your accountant can prepare accurate financial statements, develop tax strategies, and may even provide a business valuation. Depending on the type and complexity of your firm, you also might hire other professionals, including commercial estate agents and management consultants.

Make the transition smooth. If you plan to sell the business or hand it over to someone else, the new owners will want assurance about the firm’s future viability. To provide this assurance, take steps to ensure that your customer base remains stable, suppliers stay committed, and the transition to new management flows as smoothly as possible. Often these goals can be accomplished by retaining key employees who have established relationships with clients and suppliers. In addition, smart buyers will want to verify your figures. You can facilitate this process by ensuring that your financial records are in order and your assets valuations are up to date.

If you need help planning an exit strategy for your business, give us a call.

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