Exit Planning: What do I need to consider?

One of the areas often overlooked by business owners in their strategy is developing an exit plan. Whilst they may not be considering exiting the business right now, there will come a time (next 5 to 10 years) when they decide it’s time to move on. And will want the business to be in good shape when they decide to walk away, this is where an exit strategy becomes essential.

There are a number of reasons why a business owner may wish to exit their business that they have invested so heavily in (not just financially). The most common are retirement, realising the current value of the business, to start a new challenge / venture.

Types of Exits for Business Owners:

• Selling the business to realise it’s valuation
• Selling the business or passing it on to the next generation
• Creating a succession plan, management buyout, etc.
• Closing the business down

Why the Plan is so Important

Whichever type of exit is decided on, to avoid complications it is imperative that there is a proper plan in place.

Failure to have a comprehensive exit plan can not only put the stability, viability, and future success of the business at risk, but can also put the owner’s own financial wellbeing at risk.  Therefore, planning is incredibly important from both a business and personal perspective. When there is a clear plan for the owner to exit, it allows them to maximise the exit value, and helps facilitate a smooth hand over process, leaving the business in a strong position moving forward.

The Exit Plan

Creating a high-quality exit plan is tough and the best approach will depend on the size and nature of the business, the parties (owner and other employees) circumstances and the type of exit that the owner is opting for. To formulate a comprehensive exit plan, it is advisable to use the services of an independent financial expert who has been through a similar process before and can thus assist with the financial modeling around the business owner’s departure, as well as helping set up the business owner for the future from a wealth management perspective.

Business owners tend not to think about what will happen when they do walk away from their business, but this is a time that needs to be adequately planned for well in advance. Having a proper exit plan drawn up is important in terms of; a smooth changeover to the new shareholders; safeguarding the future of the business and ensuring that the owner is in a sound financial position for the future.

Reach out to us at The CFO Centre and chat with one of our top-notch CFOs or complete our Scale Up and Exit Business Assessment to understand if you are ready to scale up and have a successful exit.