I’ve had a number of conversations with clients recently about exit strategies.  Knowing what you want out of your business every day is always good, and knowing what you want out of it at the very end is something to spend time and thought on.

When you are no longer interested in running your business, or no longer capable of doing so, or if the business grows so rapidly that you know you are not the person to take it to the next level, what is your plan?  Exiting in the most profitable way possible is the most common response when I ask the questions.

There are Different Types of Exit Strategies:

• Buyout – A planned successor (family or      employee) becomes the new owner, or a business partner buys out your      shares in the business.
• Acquisition – An outside investor acquires the      company.
• Merger – Your company merges into      another one to offer new or complementary products and services.
• Initial Public      Offering (IPO) –      Shares of your company are sold to the general public, creating a public      company from a private one.
• Run Dry – A strategy where you pay      yourself a salary that consumes all profits and keep debt low until the      day when you decide to liquidate the business.
• Liquidate – Selling off all the assets of      the company, paying off debts, and dividing the remainder among the      owners.  This is usually not the      desired outcome, but can be a contingency plan.

How to Prepare Your Business For Sale

While you are setting up your business, running your business, or growing your business, always think about how to maximize the value or sales potential down the line.  The more you consider this in your planning, the better your business will look in the eyes of potential buyers.

• Hire A Good Accountant – The first thing any potential buyer is going to look at are your books, so make sure they are in good order.  The accountant can give you advice on the best business structure and presentation for your business to minimize tax consequences now and when you sell.
• Create A Brand – If your business relies on you alone, it’s not a scalable business model.  It relies on you as the owner and producer for success.  You can only earn as much as the amount of work you produce and the work must be done by you.  If you go on vacation there is no work being done and no income being generated.  Consider moving to a scalable business model, one without so much reliance on your personal work, and move to others being able to do some of the work.  Re-brand if necessary so that you are not in the business name.  The new business format can scale up or sell in the future much easier.
• Make the Changes NOW – Waiting until you are ready to sell is too late.  You need to make changes so that they will impact the business and show up in the financials.  If you know you need to update something, re-brand, create a website or recruit new talents, now is the time to do it.
• Simplify Your Systems – To create the highest number of interested buyers for your business, you need to make sure that anyone could run your business, without needing specialized skills.  Put systems and qualified staff in place to ensure the business runs efficiently without you being involved in every decision and every step of the process.
• Focus on Growth – Have a business plan that focuses on growth and communicates that in everything you do.  A potential buyer buys an existing business for what it does today as well as what they see in future potential.  Make the future potential obvious by working to a current business plan and achieving what is in that plan at every step of the way.
• Minimize Costs and Overheads – A potential buyer will look at your financials for ways to cut costs and overhead.  Do it now for yourself – look at your business as a potential buyer and make those changes now.

Have you found a number of things you can do to make your business look good to a potential buyer?  The more attractive your business looks from the beginning, the higher the chances of finding the right buyer and being in control during the negotiations.

Do you have an exit strategy in place for your business?  Need help?  Call and set up an appointment.  I’d be happy to talk with you.