[cs_content][cs_section parallax=”false” style=”margin: 0px;padding: 45px 0px;”][cs_row inner_container=”true” marginless_columns=”false” style=”margin: 0px auto;padding: 0px;”][cs_column fade=”false” fade_animation=”in” fade_animation_offset=”45px” fade_duration=”750″ type=”1/1″ style=”padding: 0px;”][cs_text]Exit strategies for small businesses explained

All good things must come to an end and your business is no different. Perhaps it’s time to pursue something different or maybe you’ve given the business world your best years and you’re looking to wind down and retire. Whatever your motivation, one day the time will come to sell your business.

This may be many years from now or in the not so distant future. In order to maximise a successful exit strategy however, your departure will need planning, and preferably lots of it.

We advise a period of 2 years to implement and plan your exit strategy to ensure you are fully prepared and no stone is left unturned. In order to maximise your sales price you need to ensure the business is as healthy as possible and from a sentimental point of view, we’re sure you want it to continue long after you’ve departed. To do that takes a carefully thought out succession plan.

We’ve put together some top tips for when the time comes to consider your exit:

1. Who will buy my business? Perhaps you already know who to approach or maybe there is someone within your business who would love to take the reigns. Depending on the profile of your ‘likely buyers’, you may need to approach the process differently. If the likely buyer is from outside of your business, you’ll need to take the time to ensure everything is in order and ‘on the table’. They will want to see accounts, operational processes, staff roles and responsibilities, customer relationships… basically a real in depth look ‘under the bonnet’ so to speak. If you’re looking at someone from within the business (who may even be a family member), the last scenario you’d want is any ongoing tension or unease so be sure to make everything as transparent and fair as possible.

2. Can I go tomorrow? We are often asked by our clients how quickly they can exit the business once a sale has been concluded. In truth, some acquirers simply won’t have the funds to buy your business outright so you’ll need to retain some involvement to protect your investment. In these instances consulting rates and fees will be negotiated to ensure you are remunerated for your efforts whilst guiding the business through a smooth transition.

3. Prepare the books You will often be asked to provide at least 2 years worth of accounts by any credible buyer. Think about the kind of accounts information you would like to see if you were making potentially the biggest investment of your life. The likelihood is you’d want to see everything! If there are area’s on which you could improve profitability, try to capitalise on them nice and early to show a consistent rise instead of occasional spikes.

4. You’re Fired! Ok maybe that’s a little dramatic, but at least try to make yourself redundant. Start to delegate big decisions to your management team and introduce key staff to any clients with which you hold strong relationships. Obviously you need to retain an air of confidentiality as naturally people are reluctant to change but done gradually and with due care the transition should be seamless. If your business is overly dependent on you and your contribution, it’s a less attractive proposition to potential buyers.

5. Make sure your business is operating at its peak Leave nothing to chance and ensure there are processes and systems in place to ensure your business runs as smoothly as it possibly can. Where possible, automate as much as you can with documented protocol to show there will be no operational headaches for new owners to contend with. Buyers love a business that is organised, process driven and performing at its optimum.

6. Document everything No-one likes this part. Think of your business as if you were explaining it in finite detail to someone with no experience of your industry. What goes where, who does what and why they do it. The people, the products, the processes, the systems… the lot. We did warn you the ‘exit strategy’ process takes 2 years and this is part of the reason why. Any interested buyer will want as little stress as possible when they take over the reigns and presenting a detailed manual on exactly how your business works will quickly allay any concerns they have in that area.

7. What makes your business desirable? Review your business as a whole and identify the things that make your business an attractive proposition to buyers. Long standing customer relationships? Great products or even better, patented products? Whatever your strengths or areas of potential growth, try to maximise or capitalise on them to make your business even more valuable. It’s a good idea to involve your accountant or financial advisors at this stage, to ensure everything is being reviewed objectively and just because a viewpoint from someone outside of the business is always beneficial.

8. What is it worth in today’s market? We often hear a business is worth what someone is prepared to pay for it. True, but that doesn’t help you when you’re looking for an estimated valuation. This is where an experienced business broker, such as ourselves, will be able to guide you on valuation based around what the market is currently doing and prior experience of your sector. Whilst you may have a figure in your head you would sell for, it’s important to be realistic and evaluate the market as a whole before settling on what would be an acceptable valuation for which you would sell. It’s important to get a rough valuation to ensure you are able to execute any further plans you may have, and if the valuation is lower than you would like, you have time to work on the areas in your business in which you could increase value.

We would always advise engaging the services of an experienced broker to help facilitate the sale of your business. They act as a buffer between you and any interested parties and do a lot of the leg work to allow you to focus on your business. The likelihood is as the owner of a small business this is your first time implementing an exit strategy, so you want to make sure you’re as informed and prepared as possible. A good business broker will help to ensure that is the case and maximise the sales potential your business has.

It is never too early to start putting the steps in place and working towards your eventual exit, after all, even if that is many years from now, what’s the harm in streamlining your business and making sure it’s as valuable as it possibly can be?

If you would like to talk to us about your own exit strategy, email us at: info@thebusinessboard.co.uk or call our office on 0118 338 1818.

We look forward to speaking with you.

Published On: December 16th, 2019 / Categories: Business /