The choice of exit plan can influence business development decisions. Common types of exit strategies include initial public offerings IPOstrategic acquisitions and management buyouts MBO. A strategic acquisition, for example, will relieve the founder of his or her ownership responsibilities, but will also mean giving up control. A key aspect of an exit strategy is business valuationand there are specialists that can help business owners and buyers examine a company's financials to determine a fair value.
Tap here to turn on desktop notifications to get the news sent straight to you. You should develop an exit plan for your business right from the very beginning. Having an exit plan in place will help you keep the business going in the right direction by constantly aligning with your long-term goals.
An exit plan also creates a trigger event that means it is time to get out; otherwise you just keep going. One thing is for certain: Your exit plan will change over time, so make sure to review it often. I suggest writing your exit plan down and then reading it every six months or so; as it changes, make updates to it.
Below are 8 steps to prepare your small business for an exit. Sourcing Buyers One business planning exit strategy book businesses fail to think about is finding buyers for their business.
Most owners just assume someone will want to buy their business, which is a huge mistake.
Prospective buyers can be individuals or businesses who have approached you in the past about acquiring your business. You should also keep a list of competitors who may be interested in acquiring you when the time is right.
Sourcing potential buyers of your business and keeping a list of them will come in handy when the time comes to exit. Reoccurring Revenue Revenue is an important piece of your business exit; not only how much you have of it, but also the form in which it comes into your bank.
Subscription-based products and services that produce reoccurring, predictable revenue are attractive to potential buyers. Another smart thing to do with your revenue if possible is to bill automatically, in advance.
A business with reoccurring, predictable revenue that is billed automatically and in advance is very attractive to a buyer. A Good Growth Pattern Obviously, having a business that has shown good growth patterns is what you are aiming for and what acquirers will want to see.
Steady and predictable financial growth is the goal. You may have some dips in your growth patterns here and there, but as long as they can be explained with an acceptable answer, you will probably be OK.
What a buyer does not want to see is erratic swings in your growth. Solid, predictable growth is attractive to a buyer. Build your business to the point where, if you get hit by a bus and are killed, your business will move forward without any disruption. You really want to detail everything in your standard procedures, including but not limited to: If you are looking at two companies to acquire with similar revenues and other characteristics but one has a written set of standard operating procedures and the other does not, which one will you purchase?
Something Proprietary Buyers love to invest in or acquire a business that has something proprietary. You could just have a certain process that is unique.
In his brilliant book Built to SellJohn Warrillow explains, "You should name and own your process. Good Bookkeeping Nobody, and I mean nobody, gets acquired without a good set of books. I was at a Goldman Sachs 10, Small Businesses alumni event when someone asked the business broker for his advice on exiting a business.
The broker had already had a successful exit and he said, "Keep excellent records right from the beginning.
Finding a good outsourced bookkeeping services company to help you keep solid records will prove vital to your growth and exit. If you are going to exit, you will need a good set of books that have been audited regularly; using an outsourced bookkeeping service is recommended.
An Owner Who Is Removed This may sound crazy, but if you are going to exit, you need to remove yourself from the business. If the business is only doing well because of you, then you will significantly decrease the value of your business.
If you, the owner, are vital to the success of the business, nobody will want to buy you or they will lock you into a long earn-out and make you stay involved for a predetermined amount of time.
A Solid Long-term Management Team While a potential acquirer may want to get an owner out of the business, they will want to see a management team who is committed to the future. If it appears that most key employees have the option to leave after the sale of the business, then this will be a big negative to a buyer.
Put good employee contracts in place with your key management team. Rather than giving them equity in the business, give them a bonus in the event of the business being sold and terms that allow the bonus to be paid out over a year or two.
Increase your chances of success by following the above steps and reviewing your exit plan on regular basis. Have you ever successfully exited a business? What advice do you have?Part of every business owner’s exit strategy should include estate planning.
Estate planning often includes a trust, but what is a trust and why do I need one?
Book Excerpt, Business Owner, Business Planning, Financial Analysis, Insurance, Life Insurance, The business exit planning process is the process of preparing a business for. Online shopping from a great selection at Books Store.
The Master Plan Exit Strategy For Successful Business Owners: Discover a Strategic Planning Formula for Maximum Company Value, Strong Asset Protection and Work-Life Balance. Planning an Exit Strategy So you have successfully started your own business and have it up and running. An exit strategy is very important to your personal business plan as well as your tactical business plan.
It gets you prepared for the future, but also allows information and tips on planning your exit strategy are offered by the. Planning the Exit Strategy. Exit strategy planning is beneficial for any business, no matter how successful, to prevent rash decision making in a time of need.
The first step in creating a Business Exit Strategy is to commit to developing a good exit strategy document or plan, that outlines the tasks to be completed in order to accomplish the objectives that you have identified. Build your business planning, start with the end in mind, why are you building your business, don't forget to plan your exit strategy from day 1.
Build your business planning, start with the end in mind, why are you building your business, don't forget to plan your exit strategy from day 1. Strategy The Leader's Role Book. All the Tools.