Head of Altius Corporate Finance, Vickie Elson-Hood, explains the importance of a business exit strategy for business owners – and the key options to consider.
So, what is a business exit strategy?
Your exit strategy is a plan for how you will eventually leave your business. It’s important to think about this early on, as the decisions you make now can greatly impact the outcome of your exit in the future.
Whether you plan to sell your business, pass it on to family members, or simply retire, having a solid exit strategy in place can help ensure a smooth transition and maximise the value of your hard-earned investment.
Determine your goals and timeline
Before you start making any decisions, it’s important to understand what you want to achieve with your exit strategy:
- Are you looking to sell the business purely driven by achieving maximum financial reward, or are you more interested in ensuring its continued success after you’re gone?
- Do you want to retire in the near future, or do you plan to stay involved with the business for many years to come?
Answering these fundamental questions will help you identify the goals that are most important to you – and will inform the decisions you make as you develop your exit strategy.
Consider your options
There are several different ways to exit a business, and the best option for you will depend on your goals and timeline. Some of the most common options include:
- Simply retiring: If you’re ready to step away from the business, retiring can be the simplest and easiest option. However, if you have partners or employees who are counting on the business for their livelihoods, it’s important to think carefully about how you’ll manage the transition to ensure their continued success.
- Passing the business on to family members: If you have children or other family members interested in continuing the business, this can be a great way to ensure its continued success, while also preserving the family’s wealth and legacy.
- Merging with another company: Merging with another company can provide several benefits, including increased market share and access to new resources and technologies. However, merging can be a complex process that requires negotiation and due diligence.
- Selling the business: If you’re looking to maximise the financial return on your investment, selling the business can be a great option. This allows you to cash out of your investment and use the proceeds for retirement, other
investments, or other financial goals. - Going public: Going public can be a way to raise significant capital and provide liquidity to shareholders. However, going public also requires a lot of time and resources, and can result in a loss of control over the company.
Start preparing for the exit early
The earlier you start preparing for your exit, the more time you’ll have to make the necessary preparations and increase the value of your business. Some things you can do to prepare for the exit include:
- Building a strong management team: If you’re planning to sell the business, having a strong management team in place can greatly increase its value. Consider investing in the development of your management team and enabling them to take over key responsibilities.
- Improving financial performance and reporting: If you’re planning to sell the business, improving its financial performance and reporting capabilities will increase its value and make it more attractive to potential buyers. Consider implementing cost management and budgeting measures, alongside future forecasting and performance monitoring for the entire business. Strong financial management of any business instils a greater level of credibility, which in turn will provide buyers with greater confidence when considering valuing your business.
Seek professional help
Exiting your business can be a complex, time consuming and an emotional rollercoaster, and for many an experience you’ll only ever do once. It’s important to get professional help to ensure you make the right decisions at the right time for the right reasons. This will give you maximum control over who the buyer is, the timing of completion, and importantly the value and structure of the transaction.
Here at Altius Corporate Finance, our team has a wealth of experience in working closely with business owners who are planning their exit strategy. By understanding our clients’ personal objectives, we tailor our approach to deliver maximum value for all stakeholders.
Contact us today to arrange a virtual business appraisal.
