Exit strategies and Business ownership

The owners will exit:

At some stage the owners will exit. This may be planned or unplanned but is generally inevitable. Ideally the exit should be in consideration for enough cash to retire on.

Many entrepreneurs and business owners have the dream exit in mind, and many over value their "baby" they have poured so much time and effort into.

Ultimately some planning for this event and a good looking business, one with a number of good customers, healthy margins and sustainable revenues will attract many potential buyers or investors. The next questions are at what age will you let your "baby" leave your care and control. Too young and you will be foregoing extra multiples on the price and too late and some of the attractiveness will have gone, but you would have enjoyed the cashflow in the mean time.

Planning for the event, even if you are not sure when it will happen is important. This includes:

• Getting the accounts in order and a credible accountant involved
• Staying on top of all statutory compliance requirements 
• Getting your tax structure in order to make any transaction tax efficient
• Having some idea of how the business exit happen, i.e. trade sale, listing etc.
• Building and implementing a succession plan for the business, reducing the dependency on yourself
• Building an idea of how you might value the business and a target value you believe is reasonable for the market
• Building a forecast of working capital and capital requirements over the next three years to finance the planned growth

By not dealing with the issue:

You run the risk of:

• Destroying value in the asset
• Losing key staff
• Ultimately losing the business on unfavorable terms

Common traps in exiting a business:

• Being flattered and falling for the first offer that comes your way
• Not having your records and accounts up to date and managed by a credible accountant or advisor
• Not sufficiently protecting your intellectual property
• Not reducing the dependency on yourself early in the process
• Not managing your business and tax structure properly to cater for this event.

Go back and consider how to improve or develop your growing business here.