To clarify the term, ‘exit your business’, it is how you intend to wrap up your involvement and step away. It also includes what you want to gain from doing so which may include limiting your losses as much as receiving a pay-out as your pension.
My advice to my fellow entrepreneurs is to start with the end in mind – think strategically about an exit plan at the very early stages of your business. The earlier you can plan for major change, the better it is for guiding your business decisions. Planning to exit your business is a major change often considered too late. For me the clever part is to have a vision and plan for your exit. Build the business that brings the plan to life and makes the objective real but keep your eyes open to maximise any opportunity that may arise along the way. For example, I sold a business two days short of my 10th anniversary rather than celebrating the milestone because the time was right.
What are the practical considerations of exiting a business?
What option you take will somewhat depend on the goals you set yourself when you started your business. Which of these sound like you?
- Sell the business and walk away
This option may result in a lump sum, but it also leaves you without a regular income from your years of involvement. Include as part of your plan, the sum you want and how you ensure your business will be valued that way by the buyer. And there are different ways to sell your interest in the business to choose from; selling to someone you know (family, your team or externally), merging, selling on the open market, or selling shares as an Initial Public Offering (IPO). Essentially, you’re selling your value, which may be a database, processes, staff, products and services. Are they ready to obtain the value you desire? If your goal when you started your business was to have a succession of businesses, then that lump sum may be how you begin your next. I often find that running the business is also the owners love, or hobby, so if you don’t plan another business, what will you do next, will it be enough for you? If you plan to walk away on the day you want to go, ensure you create the business with a plan that allows you to do this. It can otherwise be commonplace to stay involved for a period of time, but you then have to watch someone else run the business. Could you do that?
- Close the business and cease all trading
Often seen as the easiest. Sometimes the only option as in a liquidation, or the cessation of a sole trader business. Once again you are without an income for the future and this time likely to be without a lump sum. However, you may be happier this way having created your wealth in the past resulting in a comfortable pension or cash reserve. This option also requires the consideration of staff and stakeholders, and how to deal with them.
- Retire as a member of the board
With this option, you retain an income, shares and maybe major decision-making powers, but you cease working for the most part. Here, you do risk letting go of operational control and delaying the reward of that lump sum when you sell. However, if your goal was to bring family members into the business, this could be a good option for you.
The best time to plan your exit is now…
So, you’re ready to plan for the exit of your business. Whether that looks like selling up and taking the profits, staying on the board, or simply wrapping it up, there must be a strategy in place to ensure you maximise on the years of hard work and effort you put into it.
Think: Can you take time away from your business now, and comfortably leave it in the hands of a reliable team? What happens when you do take time away?
If we sat down together to look at how and when you can exit your business, what would you expect to discuss?
- Your roles within your business. Take a moment to examine how reliant those tasks are on you to get them completed to the same standards.
- Your team: Can you delegate, train or recruit team members to step into your various roles? Are they ready to run the business without you?
- Your stakeholders: Who are they, what are their expectations from you now, and the business following your exit?
- Your systems and processes: Are they reliable? Working like clockwork? Followed? Automated where possible, Humanised when needed?
- Your expectations for the business and your goals as an entrepreneur. How close are you to achieving them?
- How long do/did you intend to stay within the business?
- Are you looking for a new opportunity, or are you looking to stop working?
- If applicable, what is the business valuation and what influences that valuation? Are the contributing factors secure and steady?
- If applicable, who is your potential buyer/s? Why would they be interested? How do you attract them to your business?
- How would you structure the exit? How would it impact your personal tax position?
All these considerations will need to be tackled, so starting your exit plan today helps you as an individual to ensure you get what you most desire from your business.
I am an entrepreneur myself. I have successfully exited businesses of my own and guided many others through this very process.
I’d like to invite you to benefit from my personal experiences and the expertise I have gleaned from my years as a business mentor. Take an hour of free business mentoring and by the end of it you will have greater clarity on your end goal and understand the route you need to take to reach it. I do hope this has been of help to you, and I’m here for further assistance when you need it. In the meantime, for more advice and tips for successful entrepreneurship check out my Step Change Podcast, my Entrepreneurs YouTube channel and the Knowledge Base, where I aim to help you develop and grow your business towards the lifestyle you deserve.