Research repeatedly shows that businesses prepared for the owner’s exit are significantly more likely to endure than unprepared ones. These guidelines can help your business legacy live on – and get you a satisfactory result.
1. Preparation delivers the best results
The key message: start your exit strategy now – don’t wait until ‘later’. Life is full of unexpected turns, and you may not have the time to do what’s needed to get the best result.
2. The chief barrier
The main impediment to a successful exit is procrastination. It’s easy to tell yourself you’re too busy now and you’ll start next year. Underlying it may be a dislike of facing the future, or a reluctance to delegate – many owners have persuaded themselves no one can do it as well as they can.
3. Develop a succession team
There are advisers – starting with your accountant – who have helped other owners through the exit process. Find them and tap into their knowledge; there’s no point reinventing the wheel on your own.
4. Making the business affordable
If you intend to pass the business to family or a management team, making it affordable can be a major issue. You may need structural changes, such as separating the business into two parts – one company owning the operating business, another owning the assets such as premises or equipment. Retaining the asset-owning part and leasing the assets to the operating business could give you a tidy retirement income. These changes take time to bed in, so start early.
5. Decisions and training
If family or management are your desired successors, you’ll face issues around fairness while retaining the skills of key staff. These require careful thought, and the impartiality of your transition team can take the heat out of potential conflicts. The next step is to start training your successors – again, a process that takes time, and one where owners must often learn to delegate.
6. Improving the business
If no one in your family or team is suitable or interested, an outside buyer is probably your target – and here your accountant can help you prepare the business for maximum sale value. Changes might range from better systems and an updated customer database to tighter money management through KPI monitoring. Show the buyer they’re gaining a well-run business with efficient systems, and that it can stand on its own without you. Making these changes takes time – which is why it pays to start your exit strategy as soon as possible.