What is an exit strategy? Essentially, it’s a plan you prepare which will enable you to sell your business and get the most profitable return.
However, what business experts stress most of all is that you should never delay the planning until just before you intend to sell. Here’s the reasoning behind that advice:
Why exit doesn't necessarily mean exit
Regardless of whether you own a mature venture which is a huge success or have just begun to build up a new business, you should still think carefully about the point at which you will finally sell.
Adopting this strategy will allow you to take a critical look at your business and make any adjustments needed to get it into rude health.
Although this is termed an ‘exit strategy’, it’s also a sound commercial move because you are, in effect, optimising the running of your enterprise. And therefore, maximising your growth, as well as increasing the worth (or eventual sale value) of your business.
What might this entail?
No matter when, or if, you plan to sell, your exit-strategy planning should look at the following areas:
- Increasing your profits and expanding your customer base
This may include expanding your services. So, if you are the owner of a deli, for example, you might consider investing in coffee and tea facilities or even adding a small café space. This initiative would fit well with the business model and bring in new trade.
This also implies staying in touch with trends and technologies within your industry. This again will positively impact on your business’s performance, as well as impressing any future buyers.
- Get your business in good order
This means keeping your financial records up to date and accurately reflecting your healthy trading position.
In addition, your premises and equipment must be clean and well-maintained – once again to reinforce the high standards of your business.
- Remove yourself from the business
Any business which requires the daily input of its owner will inevitably be downgraded by the market.
Buyers will simply conclude that the value resides in the owner rather than the enterprise. You will immediately increase the value of your business by delegating day-to-day running to a competent management team.
- Create a standard operating procedure
This task follows on from creating a management team and aims to capture and reflect the essence of your business operation.
A document detailing this information would be invaluable to a prospective buyer and has the potential to increase the resale value of your business accordingly.
- Optimise your company website
It’s common for a business’s website to be maintained and upgraded only when it’s really necessary.
However, prospective buyers will not be impressed by a creaking, outdated website performing below its best. As elsewhere in the business, you should aim to create an up-to-date site with no technical flaws or security issues. This will boost buyer confidence and maximise your business value.
Developing an exit strategy is always cost-effective. It is an ideal way to grow and develop your business which will always leave you in pole position to control your own future and decide if, when, and how you choose to exit your business.
For many owners who eventually wish to sell, one of the most demoralising aspects of the process can be the feeling you are entirely at the mercy of the markets. A good exit strategy will protect you from this scenario.