Preparing an exit strategy
Research indicates that if a business is prepared for the owner's exit they are more likely to endure than businesses that are unprepared. The following are guidelines for an exit strategy that will help your business live on while giving you a satisfactory result.
Preparation delivers the best results
The key take away from this is: start your exit strategy now - don't wait till a later date. Life is unexpected. Later on you may not have the time to do what's necessary for the best results.
The chief barrier
The biggest barrier to a successful exit strategy is procrastination. It's easy to convince yourself that you're too busy but you'll start it soon - whether that be next year or whatever date you rationalise to be reasonable.
There are many reasons one may do this. Dislike for facing the future, reluctance to delegate responsibility or a number of other excuses. Like many, you may have persuaded yourself that no one can do it as well as you.
Develop a succession team
There are many people who can help you, including your accountant, who have done the same for other business owners. Find them and tap into their knowledge for your own exit strategy.
Making the business affordable
The major issue in passing your business to family, or even a management team, is ensuring it continues to be affordable. You may need to separate the business in two: one company owning the operating part, the second company owning the assets, such as your premises or your equipment. You could see a tidy retirement income by retaining the asset owning portion and leasing them to the operating part. However these kind of structural changes take time to take effect, so start them early!
Decisions and training
If your desired successor is family or management, you face the issue of maintaining fairness to everyone while also retaining the skills of key staff. These require thought and care, where you will benefit from the experience of your transition team. They will remain impartial and help take the heat out of any conflict.
From there you will need to train your successor(s) - something which will again take time. A major hurdle to clear is learning to delegate.
Improving the business
If there is no one suitable in your family or management team, an outside buyer will be your target. In this case, your accountant can add value by helping you prepare the business for sale. Changes to make can range from better business systems and an updated database to tighter money management. You'll want to show buyers what they have to gain and that the transition will be as smooth as possible.
If the business is based in some part on your personality you'll need to show it can stand alone if you were to leave at that moment. Again, changes like this can take time. Did we mention that it certainly pays to start your exit strategy as soon as possible?