Exit strategies are a key part of a business plan and set out steps for your departure from the company, whichever situation this may be in. It is largely advised that a person starts to plan their departure from a business well in advance of when they actually want to leave. In this article, we will look at planning the exit from a business and explore the key considerations to bear in mind to maximise the value of your business.
Reviewing Customers and Suppliers
By reviewing and assessing any issues with suppliers and customers, you are going a long way to mitigating any risk factors that are in place. By auditing suppliers and reviewing issues such as payment terms, value can be maximised as far as the sale of a business is concerned.
A review of debtors and credit and the control processes/customer terms combined with a review of creditors, suppliers, and payment terms is key to identifying any areas of concern that would benefit from being addressed ahead of the sale.
Ownership, Structure, and Protection Review
Reviewing the current company structure ensures that the current set-up maximises both the opportunity presented by selling businesses, but also the benefit from the best taxation structure on sale. It is also important to conduct a review of the protections currently in place, including shareholders agreements and issues such as power of attorney and take advice on what protection should be in place if it is missing.
Looking at the Succession Plan
Without yourself to run things, can the business still operate? Of course, a new buyer may run the business or bring in a new director or CEO to oversee things; however, this is not always the case.
A new owner may be seeking a business that can run itself. With this in mind, you should consider whether you have a strong management team ready to take over after your departure. Start integrating them into the day-to-day operation of the business as early as possible to give them the best chance of success and ensure a smooth handover process.
Remember to hand clients over to other staff and managers in good time if you are an owner which also oversees clients. This way, you give the business a good footing on which to move forward under the new regime.
Sales and Marketing Review
Fundamental to any business in sales, is the ability to attract income through marketing and, ultimately the sales flow. Prior to sale, a revamp and an audit of your sales and marketing strategies can result in either more leads and sales or more efficiencies to ensure the process is cost-effective.
Before a sale, it is a good idea to have a figure in mind for what the business is worth. Of course, an advisor will be able to help you get the best possible price, but you should still manage your expectations throughout the process.
What have similar businesses in the market sold for recently? This is a good way to get an idea of a ballpark expectation, and you should also keep in mind your salary, which a new owner may adjust the valuation due if they need to pay a higher salary, e.g., the going rate for a managing director in the industry.
Where the company owns property or where there is a lease in place, it is vital to review the best position based on the circumstances. For example, when selling a business, some sellers want to retain the premises or the property in which the company is housed. If a property is not extracted well in advance of a sale, the tax implications can be extensive and very costly.
In addition, it is very useful to review any assets and stock. These are key to maximising value, and establishing their monetary worth is important to all parties – buyer and seller. Ensuring they are accurately reflected is a way to maximise value on sale.
Basic Company Secretarial review
Making sure Companies’ House is up to date and that all the statutory books are current is something that should be done periodically but is often forgotten in the day-to-day consumption of running a business. Before selling, and during the initial process of selling, you should take care to identify any areas that require rectification. Doing this will reduce the risks of any potential buyer having any concerns, minimise hiccups in the sales process, and ensure as smooth a sale as possible.
There are a number of considerations to make when you are planning an exit from the ownership or management of a company to maximise the value of your business. Reviewing suppliers and customers, addressing any issues with property, and conducting a structure and management review are all ways to ensure you can exit having maximised the business’ value.
This might be something you’re not too familiar with, you may be hesitant to explore your options. It’s still crucial to find a path that suits you, especially with critical decisions such as an exit plan. Here, we delve into everything you need to know about exit strategies and how to create one for your business
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