Business owners sometimes leave their exit planning far too late and as a result, do not realise the potential value of the business.
There are a number of options that business owners consider when they are thinking of exiting:
- Closing the business and walking away
- Handing over to family members (in or not in the business)
- Selling the equipment, tools (either in leased or freehold premises)
- Selling the business as a going concern
- Selling the business to staff members
Let’s have a brief look at these options.
Closing the business and walking away
Depending on where the business is in the life cycle, there may be the potential for a profitable sale, and walking away gives no residual income, even though you might have gained some revenue from sale of equipment, goods, parts and tools.
Handing over to family members (in or not in the business)
If the family members are actively working in the business and have a wide knowledge and understanding of how the business ticks right across all the business operations, it may continue to be successful, but a key question here is – “Where is my income coming from now that I am retired? What will I now live on?” If family members have been absent and not actively involved in the business it could be a recipe for disaster unless very precise systems, processes, procedures and delegations are well documented.
Selling the equipment and tools
It usually occurs that items are sold at “fire sale” prices where the purchasers get bargains but the seller doesn’t receive much for his goods particularly if they are sold at a clearing sale or auction often without any reserve.
Selling the business as a going concern
This is the most lucrative method for selling, but the key point is that the work for this outcome should start ideally up to three years beforehand so that the real value of the business can be realised through progressive growth activities. This is also the best position for the buyer because they are then buying a viable, sustainable and energised business.
A TIP: engage a specialist business broker to market the business. I have key strategic colleagues who can help.
Selling the business to staff members
This method can be very successful and there are numerous examples of great success stories through Employee Share Ownership Schemes and other strategies. I have great connections with organisations who specialise in setting the schemes up tailored to your specific industry, business and needs.
In later blogs, I will provide a range of tips and information to assist you along this journey.
In the meantime, I have included links to a couple of key diagnostics that you might like to complete. I will provide a confidential, information packed detailed report that will help you along this important journey.
Perhaps your journey to exiting starts today!
- Attractiveness Report – How attractive is your business to a potential purchaser?
- Personal Readiness Index – Are you personally ready to exit your business?
- Your Exit Planning Success – 3 easy steps and it’s free!
In my next article I will outline the 7 key steps:
1. High Level Goals
Determine your high level exit planning, business & personal goals.
2. Value Gap Analysis
What is the potential future value of the business and what is the potential value of the business now.
3. Business Attractiveness
Discover how attractive your business is to a potential purchaser.
4. Personal Readiness
Are the shareholders of the business ready to exit or transition out of the business?
5. Business Readiness
This 22 step audit process provides the business with an Exit Planning Readiness score and a pathway moving forward.
6. Value Creation
Based on your goals, we further refine and develop your strategic plan and look at value creation strategies.
7. Accountability & Implementation
We implement a regular accountability meeting where we project manage the exit planning process.