Guide: how to plan your exit strategy

Many owner-managers put in a lifetime of hard work building their business only to throw away some of the rewards by failing to consider properly how they will exit from the business,­ both financially and as a manager.

It is vital to begin planning an exit at an early stage if it is to be a success. Below, we have included some steps to guide your thinking before you get there and ensure that you – and your business – are served well by an effective exit strategy.

Planning ahead

As mentioned above, this can be the most crucial stage. Initial questions about your exit should include a view on your ultimate goals – what price do you want to achieve for your company? When do you want to sell up? Is there anything you want to keep control of? – and then work backwards from there.

Your ultimate aim to is to create a viable and attractive option for potential buyers. This means having all of the basics right and worked out far in advance, including a detailed look at your sales or customers, brand and reputation management, up-to-date processes and infrastructure and – probably most importantly for an interested buyer – a detailed, historic look at your accounts.

Carrying out your own, internal due diligence exercise can also be a good idea, if only to see what the buyer may unearth and then deal with any problems in advance.

Building a team

Part and parcel of this preparation is to get a good team on board with you, as your business will only look attractive if it also looks like it will continue to thrive without you. Create a management team that is empowered to take on day-to-day operations, take a back seat and watch potential buyers put themselves in your shoes.

Identifying top-performing employees is a good move, but the key is to find people internally who already know your business through and through. Try and offer the best some incentive to stay on after the sale, as it will both reassure buyers and keep the business running at maximum capacity as long as possible.

Anticipating a smooth handover

There are several preparatory steps you can take to make sure any handover is as smooth as possible. Keeping customers on-side is one, as is keeping suppliers sweet: if you rely on one or two of either too much it could harm your business if and when it changes hands. Try to protect these relationships as much as possible, mitigate risk by tying up contracts and other arrangements in advance, and reassure them directly if possible.

When it comes the transition itself, there are many steps you can take to keep it smooth. You can prepare manuals for each division or part of your firm – hard work that pays off in the end – and collate paperwork to make it as digestible as possible. Above all, pinning down the details of your firm is paramount.

Think about the different exits available

There are many different ways of exiting your business, each with their own strengths and weaknesses.

If you’d like to sell up, and if you know of several complementary businesses nearby or in your space, then a merger or acquisition deal could be best. Selling to a friend, acquaintance or family member is also a good route if you know of an interested party with relevant skills or interest in your business. Selling to employees might also be an option.

Initial public offerings (IPOs) or floating on the stock market could be right for you, but is a risky and expensive route and hands over a lot of control to your future shareholders. Handing the company over to your management team via a buy-out can be attractive if you trust them to run it, too. Finally, if all else fails, liquidating your business is the best way to extract all the remaining value while also closing up your firm forever.