BUSINESS EXIT STRATEGIES

You have worked hard to build your business but what will you do when the time comes to leave?  The right exit strategy can help you realise the value you have built.

Sadly, a good exit strategy is rare. Most business owners have not engaged in any meaningful form of exit planning.  As a business owner, it is critical for you to understand the potential impact that the lack of an exit plan could have on the value and saleability of your business.

If your plans are to exit your business one day and transform equity into cash, you will need to build value in your company by creating unique products, services, relationships and distribution channels, building an intellectual property portfolio and expanding your customer base.

To build a saleable business, you need to plan well in advance. The best time you need to think about selling your business is on the day you start it up!

YOUR EXIT OPTIONS ARE:

• Work in the business until you die
• Semi-retire and let someone else run the business until you die
• Liquidate the assets of the business (either voluntarily or involuntarily)
• Just close the doors
• Sell the business

Most profitable businesses can be sold.  Few buyers will purchase a business without conducting an extensive due diligence.  A buyer’s offer is always contingent on the results of a due diligence process.  Business owners are not usually prepared for the wide-ranging and numerous questions to be answered during this process, which may become difficult for many owners.

Most due diligence is done after a potential buyer has made a preliminary offer.  The due diligence process then begins, usually with a very short time frame allowed by the seller.

The seller is also required to invest thousands of man hours by the managers, the owner himself, employees, accountants, attorneys and other professionals.  The cost of the due diligence to the seller can easily run into big numbers.  This figure is often not budgeted for and can put a significant financial strain on the business.

Therefore, a well prepared business often has a better chance of being sold than an unprepared business.  The goal is to have the business prepare 80% to 85% for any prospective buyer that might come along before you even consider selling your business.

We cannot emphasize enough the importance of being prepared for an exit strategy long before you even consider selling your business.