The 9 Step Guide To Building An Exit Strategy
Published: 19th Dec 17
Categories: Planning, Success
The 9 Step Guide To Building An Exit Strategy
A business exit strategy refers to the plans you put in place to someday leave your company.
Defining your business exit strategy doesn’t necessarily mean you will follow that plan, and it doesn’t mean you have to set a firm date. It is more an awareness of where you see your business heading, and knowing how you will someday get out of it what you intended to.
For some investors, there may be a clear goal and date put in place, such as wanting to sell their shares for 4x the value in five years’ time. However, if you’re a small independent retailer, you may be happy to stick with your company for 10, 20 or 30 years or more. An exit strategy can also be a great tool to preserve the long-term health of the company once you leave.
Developing a successful business exit strategy as a small retailer
Business specialists often recommend the following nine steps to help you develop a well-rounded exit strategy to suit the needs of yourself and of the business.
1. Plan for a buyer
Do you have a buyer in mind for when you come to sell? If you’re passing it on or selling to family, then try and be as honest and fair as possible in deciding on a suitable value for the business. If the plan is to sell it to a larger company, you will want to make sure all of your records are fully professional for a takeover.
2. Set a rough timeline
How long do you want the sale process to take? If you want to build the company and pass it on immediately then you need to make yourself replaceable. However, many small business retailers like to make this process gradual, whereby you stay on as management during a transitional process following the sale.
3. Bookkeeping is key
If you expect to make some decent money on the sale of your business, then the buyers will want to see a firm set of financial records going back at least two years. Start taking measures today to ensure you have accurate bookkeeping taking place. This is something where many small retailers fall short on.
4. Remove yourself from the equation
It’s already been mentioned that you should consider a transitional period as you step away. However, ultimately you will need to step away and you have to recognise that. You may want to start empowering more employees now and making yourself less integral to the day-to-day operations. These sort of decision-making bottlenecks are common amongst small independent firms.
5. Bring your systems up-to-date
Nowadays, digital administrative tools and accounting software make selling a company much easier as the new owners can quickly see how things are managed. If you are using out-of-date bookkeeping methods as a way to keep a record, then you may want to upgrade as soon as possible.
6. Start writing everything down
By writing down all the steps that go into managing your business on a daily basis, you can start to build a “how-to” guide to running your business. This guide will not only make your company much more attractive to buy but will also make things easier in the aftermath of the sell. You don’t need to be constantly contacted to advise on how to perform or oversee menial tasks or issues.
7. Increase your businesses value
Selling your business is easier, and of course more profitable, if you have a clear set of USPs in place. It’s time to double-down on what makes your company so great and why people may want to buy. This could be because of your loyal local customer base, of a great team of staff, or simply an outstanding range of products. At the same time, look at issues your company is facing and find ways to fix them.
8. Build an idea of what you want to sell for
No doubt you’re looking for as much as possible when you come to sell your company. But that really isn’t good enough. Start thinking of a target figure that you would like to sell for. Calculate a figure that would be enough to then help you with the next stage of your career, but you should also be realistic of course. To get help with this, you may want to speak to more experienced business brokers or accountants who can help professionally value your company.
9. Build your sales pitch
It’s unlikely a buyer will simply look at your company from the outset and want to buy. Instead, you need to be able to sell them on the prospect of why your company is right for them. Being aware of your USPs will help in this, and you can craft a long and short sales pitch which highlights why somebody would see your business as a worthy investment.
Always get professional advice
Though some of the points may seem more suitable for those looking to sell up in the next couple of years, they are still helpful for small independent retailers looking to eventually get something out of their company. It may be worth speaking to a local accounting firm who can advise you on what similar businesses may eventually be worth, and how to professionalise your operations from an investor standpoint.
If you are looking for further advice on your exit strategy, then Virgate Accounts might be the right firm to help guide you on that path. We offer a 100% free no-obligation consultation to discuss your company and see if we can be of assistance now, or further down the line. Contact our team to find out more.
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