How to Create an Exit Strategy
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
What are exit strategies for a business
While you may have heard the term, you may be unsure about the specifics. An exit strategy refers to a plan that is in place for when you decide to call it quits with your business. There are multiple reasons why someone may decide to leave a company behind, so it only makes sense for there to be a range of exit plans that you can implement, including:
- Merger and acquisitions: your business is acquired by another company or your businesses merge as one.
- Selling your control: when you sell your share of the business to your partner
- Initial public offering (IPO): if your business is private, this refers to giving the public access to allow them to purchase shares of the business
- Acqui-hire: your business is bought due to the skills and talent of the employees within the company.
- Family succession: a family member becomes the new owner of your business
- Management buyouts: a member of management buys the business
- Liquidation: when you put an end to the business as it is no longer making any profit. Assets are sold to make up for any debts.
- Bankruptcy: usually the last option of plans to end the business and assets are seized to compensate for debt.
Creating an exit strategy?
There’s no doubt you want to be prepared for your business’s future, but you may be unsure how to create an exit strategy. However, there are several things to keep in mind when it comes to implementing your exit plan.
While the future is unpredictable, having a target date for when you expect to leave the business will help. This will allow for a smooth transition – perhaps the new owner needs to see how the business runs on a weekly basis, or training is required for a family member who is taking over the company.
Consider your expected achievements by the time you plan to leave your business. Doing so will allow you to either decide which plan you choose, or whether the plan you have already determined is the most suitable route or not.
Requesting feedback from employees and clients will make the business more attractive to buyers, as they can see up-to-date satisfaction from workers, which will help the transition to be as efficient as possible. Plus, the new owner can assess any necessary improvements.
Publish your plan so that those involved in the business, like employees, stakeholders, or even prospective buyers, are aware of the end goal. Doing so provides opportunities to add timeframes for any tasks within the company to keep maintaining the goals of the business.
Why do owners create exit strategies
There are multiple benefits that owners can reap with an exit plan.
Employees are an essential part of any business, and owners can use an exit plan to provide protection for them. Whenever you leave your business behind, an exit strategy gives employees peace of mind knowing that their job is safe as a new owner joins the company.
An exit plan provides control and makes the stressful life of a business owner a little bit easier. If you need to act quickly, for example if your profits are sky-high, you have the opportunity to sell your business at a faster pace than if you didn’t have an exit strategy.
Financial loss is limited with an exit strategy. For example, there could be a change in your business’ market, and you realise that you need to leave the business behind to avoid financial failure. With your exit plan in place, you can reduce your loss by having the freedom to move quickly – and you can assess the future of your business by staying in the know of any adjustments in the market.
Once you know what an exit strategy is, there’s essentially no reason to delay implementing one into your business, given its benefits. Whether you choose to leave it with your family or decide to sell, there’s a range of options to choose from. Speak to Hylton Smythe today to see how we can help you sell your business.