One of the key elements of a good exit strategy is knowing, or at least having a decent idea of, the circumstances in which you would ideally like to exit. We’re not talking about an unfortunate scenario in which your business is struggling and you’re forced to find a buyer or enter insolvency or liquidation.
Here, we'll examine some situations in which you'd be leaving for the right reasons, with the decision being entirely your own.
The business is thriving
Unless you’re approaching retirement age, it may seem antithetical to exit a business just when it is performing and growing at its peak. However, this is in fact probably the best time to exit, for a number of different reasons.
Firstly, a prosperous company with excellent growth prospects is likely to generate the best possible valuation and a high sale price when the transaction is finally complete. After all, a successful business offers the prospect of greater future profits, reinvestment opportunities and expansion into new markets and territories, all things buyers will value highly.
If you can demonstrate your business' success and growth projections, this will also perhaps help to smooth out negotiations, giving you a strong position from which to make your case and reducing the likelihood of buyers looking to haggle over the finer points to drive the valuation down as far as possible.
Finally, a thriving business can mean that you continue to earn from it well after the sale has completed. If you structure a deal so that part of the price is paid up-front and the remainder (or some of it) in deferred earn-outs, then you can continue to share in the business’ financial success.
The business is ready to grow without you
For a lot of owners, they will reach (and often aim to reach) a point at which they realise that the business can continue to function, and perhaps grow even further, without them at the helm. Maybe your own responsibilities have already been reduced significantly as others take on more seniority, or maybe there are up-and-coming leaders within the business that you think are ready to assume such responsibility.
Either way, you may decide at this point that the best thing for you to do to help the business fully embrace its opportunities for future growth is to step aside. Whether you market the business for sale and look to bring in a new owner to work alongside the current team, or pass it on to your staff through a management buyout, you can rest assured that your business is primed for future success.
Market conditions are right
If your business is healthy and market confidence is up, then this is definitely a good time to sell. Of course, you’ll want to thoroughly assess whether the price on the market reflects the true value of your business. If interest rates are low, for example, buyers will find it easier to access financing, helping them to meet your valuation.
Keep an eye on the market to gauge what the sentiment is around small to medium-sized, high-growth businesses and, if your business is thriving and buyers are targeting firms like yours, then these are probably the perfect conditions in which to sell.