Whether you’re a sole trader or employ a team of ten - having an exit strategy is crucial for every business owner.
Perhaps you’ve spent years building up your family business and the kids are ready to inherit. Or maybe your financial circumstances have changed, and you need to sell. Possibly, you’ve simply decided it’s time to sit back and enjoy the life that you've worked so hard for.
Whatever the reason, having an exit strategy in place means you will be more likely to get a return on your investment. Here’s three common situations that small business owners face where it pays to have an exit strategy ready to go.
When you want to keep it in the family
If you run a family business, having a succession plan in place makes it simpler to transition the business when you feel the time has come to move on. A good succession plan will help ensure your legacy continues, paving the way for change if there are multiple family members involved in the day to day running of the business.
Succession planning can help you avoid infighting amongst family members. It also allows you to lay the groundwork with your existing clients so that when you do finally leave the family business, they feel assured that they will still be dealing with a trusted member of the team. Succession planning is particularly important to a family business if one family member has been the face of the company.
Putting a plan in place for a gradual switch of responsibilities allows you to build trust between your customers and the new head of your family business.
When it's time to close up shop
Sometimes no matter how hard we work, our dreams fail to come to complete fruition. If your business has fallen on hard times, having a good exit strategy in place could be the difference between selling for a profit or being forced into liquidation.
Just as you had a plan when you set up your business, you should also have a plan for when you want to leave. Failing to plan for the bad times as well as the good could mean you are forced into a sale.
When you’re thinking of retiring
You’ve been doing the hard yards for years and now it’s time to think about retiring from your business. Having an exit strategy for retirement means you will be in the best position to sell your business to meet your needs.
Whether that means liquidating the business assets over time (to extract most of the profits before you eventually wind up), selling your business to long term employees or putting your business on the market, every exit strategy . Each action comes with advantages and disadvantages so it’s useful to know what you want to get out of the sale and plan accordingly.
Whichever exit strategy you choose, planning in advance gives you the time to do it right. Chatting with your accountant or business adviser should always be your first step.