Why Every Business Needs An Exit Strategy
In some cases it's voluntary, in others not so much. All the same, every business should have an exit strategy in place for when the time inevitably comes.
Business owners of all shapes and sizes have many balls to juggle and keep in the air. Unsurprisingly, many get caught up in the now or short term and forget about what their business is going to look like in five to ten years time - after all, time waits for no man. While you might think that you’re too busy to think that far in advance, failure to have a solid business exit strategy in place is actually doing yourself a disservice in the long run.
What Is A Business Exit Strategy?
One way or another, an exit strategy is a concrete plan of attack regarding wrapping up your involvement in a business. There are many reasons owners may have for exiting a business - just a handful of some of the more common include decreasing profits, increasing competition, a change in your health or life goals, retirement, passing the business down to family members, or even just cashing in on your success. Ideally, business owners will exit voluntarily, while others may have no choice via liquidation.
Preparation is key when it comes to successfully exiting a business, and owners should incorporate a strategy into their overall business plan in order to keep your company in it’s best possible shape prior to departure. The process can be lengthy though, and involves a great deal of financial, legal and operational obligations that all need to be addressed.
What Are Some Examples Of A Business Exit Strategy?
If you’re looking to retain control over how you eventually exit your business, then you’ll need to put some thought into it. The end goal is always to ensure your brand is at its peak in terms of profitability, so your bookwork needs to be spick and span, and your systems and processes run like a well oiled machine. Essentially, your brand should be running so well that they won’t even notice you’re gone.
Whether you like it or not, the day will eventually come where you’re no longer in control of your business. However, anything that you do now that can benefit a future buyer will also benefit you - so what are some of the more common business exit strategies that you should start thinking about?
Succession Planning - Even if you’re a business owner that doesn’t intend on handing over the reins to another member of your family, you still need a plan of attack in regards to what happens to your brand when you’re no longer there to spearhead the operations. The next in line to the throne could be an employee, a business partner, or even an external buyer - but these are all things that need (and deserve) your attention in advance if you don’t want to risk seeing all your many years of work go up in flames.
Closing Your Business - It can be tough to know when to dig deep to keep going, or when it’s time to pull the plug. If your business is failing, and has been failing for quite some time, it may be very difficult to sell it. Should you find yourself edging closer to retirement or perhaps lacking the resources to adapt your brand to keep up, closing down your business may be the better choice. It involves selling off assets, paying off any existing debts, and keeping whatever money is left. In extreme scenarios, closing a business may also involve insolvency or bankruptcy.
Selling Your Business - Arguably, this is the option that requires the most forward planning. Your business may be appealing to you and hold sentimental value, but a future buyer or investor isn’t going to see it in the same light as you do. If selling is on the cards, make sure that your brand is “financially fit” even years in advance, as you’ll in turn be able to command the highest possible bid and go out “on a high”. It’s also crucial to have your policies and procedures in order so that the next generation can get along just fine without you.
Sourcing Assistance With A Business Exit Strategy
If you are looking for assistance with crafting a business exit strategy that works for you and not against you, then it’s important to speak with an advisor or accountant for the best advice on how to move forward. After all, you are essentially planning the next phase of your life too.
At Muro we are more than just accountants. We work with our clients to help them build a business and a lifestyle that they love. We believe by creating an ongoing and easy to understand business and financial ecosystem, this enhances their business acumen allowing them to make informed and inspired decisions to set and surpass their long term goals that go beyond just the financial ones.
Get in touch with us at Muro today to ensure that you’re on the right path for success. With offices in Brisbane and the Gold Coast, we work with clients right across Australia.