Developing an exit plan
Ideally, you’ll sell your business at its peak. Too often, business owners don’t look far enough ahead. They don’t read the market effectively and panic-sell once their business is tanking.
You want to maximise returns. Prepare for your exit properly and several years ahead if you can, bearing in mind things might change if the technological landscape shifts unexpectedly or you lose a few key clients or competition intensifies. Preparing an exit plan is about your business legacy, but it’s also about taking care of the employees who’ve worked hard with you on your shared purpose.
To plan well for your exit:
- Give yourself enough time. The process of finding buyers might take longer than you think.
- Keep your foot on the accelerator until you’re over the finish line. Too often business owners mentally ‘leave the building’ while they’re still meant to be operating the company. You’ll be able to downshift soon enough. For now — focus on developing and delivering great products and services.
- Keep developing your people. Incoming owners want smart teams who deliver results. Your career might be taking a different step but your staff likely intend to stick with the business, so it’s important to stand by them until the very end.
What sort of exit is right for you?
To exit, the basic options are to sell to a management team member / successor, or to partner with an external investor (be it private equity, venture capital or a founder investor). Sometimes, senior managers within the business take over operations. It can be a great way of ensuring continuity and maintaining existing relationships. There can be risks, though, including financial risk if the buyout is in instalments. You might find offers from within the company are lower than external ones. The MBO process tends to be more cumbersome and often takes longer than a process with an external buyer.
The more time you give yourself to muse over your options and come up with solid future plans, the better the deal you’re likely to strike. This moment has been coming since you first had the idea to start a business. You want to do all you can to make the most of it, and honour the years of work you’ve invested bringing your business to where it is now.
You don’t have to use a broker to sell your business. Every business is unique, with its own needs and structures. There are some strategies that can help you sell on your own. Get clear on what you want. People sell businesses for all sorts of motivations. You might be keen on top dollar over all else.
Should you consider a Management Buyout from within your company? Or go with external Private Equity, Strategic buyers or a Founder Investor? There are pros and cons with each approach, and the more time you allow to consider your options.
Private Equity (PE) has become an increasingly popular investment strategy over the last decade. According to the latest data from Preqin – a research house that specialises in alternatives, the global private equity market surpassed $4.74-trillion USD at the beginning of 2021. By providing capital and new...