No matter where you are in your business owner journey, it’s important to plan for your business exit and develop a business exit strategy. There are various reasons for a business owner to prepare for their exit, including a change in their circumstances or lifestyle, an increase in competition in the market, or simply a desire to enjoy the fruits of their business success.
When Is The Right Time to Execute Your Business Exit Strategy?
Knowing exactly when you’d like to “pull the trigger” is the first step to determining what shape your exit will take, and what needs to be in place for this to happen smoothly.
For new business owners, you may not yet have your exit strategy planned out, and this blog series will walk you through the key business exit considerations, getting you in the right frame of mind with a focus to consistently increase the value of your business. For established owners looking at a near-future exit, it will ensure you’ve ticked the right boxes and importantly, are empowered to make the right decisions for yourself and prepare the business for a change of ownerership.
Your business exit strategy works towards having the business in a healthy state before you bid it farewell, and, much like the stages of planning to purchase a business, requires you to do your due diligence.
As a business owner, you will likely have gone into your business with a vision for what you’d like to achieve.
Did you aim to sell once you’d achieved a certain level of success, profits or growth? Is it all about expansion and new locations domestically and overseas? Or perhaps you’d planned to create a stable business and pass it on to someone new when the time felt right?
Take a look at where you are on your path, and utilise your existing business plan to check off if you’ve achieved the goals you had in mind. If you’re in a period of sudden growth with a lot that relies on your active involvement in the business, it may not be an ideal time to exit. Or, you might realise that you’re looking for a new challenge and are definitely ready to exit this business.
4 Key Timing Questions:
1. What is the best time to sell to realise the most value from the business I’ve built?
A business that’s going from strength to strength will always have more appeal to buyers than one that’s in need of serious support and overhaul. A potential buyer will consider both the existing and future value of a business, so you should be able to identify what value you can offer a buyer today, and in the coming months and years. If you know your business will appear stronger in X amount of months, you can work towards this as a potential exit date.
2. Has the business outgrown me?
Your business may have evolved from a 10-person team to offices of 100-people plus, and your level of expertise may no longer serve the business in its new form. You may recognise that a new owner will offer an injection of a different skillset and level of management, and by exiting the business you’ll hand it over to someone who will ensure it fulfils its potential.
3. Is the business model or market changing in a way that will impact me negatively?
Business models can and will shift over time, and all owners should be aware of the direction their business is heading so they can lead the charge or choose to step away if the new business model doesn’t fit with their goals and vision. Significant changes to your industry can also be a key reason to exit – developments in technology may begin to make your business model obsolete, so you can choose to adapt to stay competitive, or perhaps it’s the right time to hand your business over to someone with the skills to make it work.
4. Have I outgrown the business?
A personal consideration is whether you have lost your enthusiasm or drive for your business (especially relevant to those who have seen success), where a mature business model no longer provides the excitement that ignites your business mind.
Preparation and a clear understanding of your exit strategy are essential for a smooth transition. Done right, a business exit can be a long process, involving both legal and financial management. In the next part of this series, we’ll take a look at the process of restructuring your affairs in your exit process.
