September 29, 2020
A Guide on Creating a Business Exit Strategy from the Start
By Achim Neumann
You have just started a new business. You are deeply passionate about serving your customers and providing them with the best products and services money can buy. Working out a plan for how to exit the business is the last thing on your mind amid your boundless optimism and enthusiasm.
Most people who go into business for the first time make a simple mistake: failing to create a business exit strategy. While it is true that an exit plan might materialize as your business grows and develops, it is always a much better idea to have a road map to your eventual exit clear in your mind from the beginning.
A key advantage to a clear exit plan is that it will be easier to get investors on board from the beginning. Top business minds love a business plan that demonstrates how they will end up with a return on their investment.
Potential Exit Strategies
There are several potential ways that you can exit your business:
If you own your business outright and do not have to answer to investors, the simplest way to prepare the ground is to raise your personal income from the business in the years before you sell. This will allow you to gather together a good deal of savings before you eventually sell or close the business.
If you own a larger company that is growing rapidly, you may one day look to get it listed on the stock market. Once your business is publicly listed, it will then be possible for you to sell your shares when the time comes to make an exit. Company management will then select a new leader and proceed without you.
Another exit strategy may be to sell your company to another company or entrepreneur, possibly in the same industry. To do this, you may need to contract the services of an experienced M&A Advisor and / or Business Broker to find suitable buyers for your company’s profile.
Whenever you plan to bring an end to your time in charge of your company, whether it is in two years or 20, planning for it now will make things easier in the long run. Here are some steps that you can take to prepare the way for your eventual exit.
Step 1: Make the Company Self-Sufficient
Among the largest obstructions to a smooth exit is a company that has become over-reliant on its founder. We commonly see businesses that cannot function without their owner — after all, the owner is the one whose initial passion and vision have made the company into what it is today.
As your company grows, it is often a good idea to bring in a CEO. Resist the temptation to become the CEO yourself. Independent leadership is important to bring in new ideas and help the company to become more independent from your influence.
It is important to build work teams and ensure that the company is not synonymous with your name among the customer base. This way, when it comes time for you to leave, the company will be capable of running smoothly in your absence.
Step 2: Keep Detailed Financial Records
One of the biggest challenges when a business owner wants to sell their company is organizing the financials and documentation. To help ensure the process passes without a hitch, aim to keep detailed financial records from the very beginning of your time in charge.
If your exit strategy involves selling the company, set up a mechanism for creating and storing these documents immediately. A company whose finances are in order is much more attractive to potential buyers.
Step 3: Keep Your Cards Close
Broadcasting your exit plan is a sure way of sowing disharmony and uncertainty among your employees and customers. Customers and partners will be reluctant to trust you, and employees may not work to their full potential for an owner who is uncommitted to the long-term success of the business.
When planning your exit, make sure that you do it discreetly to keep things as close to normal as possible as your final days approach. Confidentiality is everything.
Are You Ready to Sell Your Business?
If you have decided to exit your business by selling it, we can help. A. Neumann & Associates, LLC, has a wealth of experience from over 15 years in business when helping market businesses for sale, qualifying buyers and negotiating the terms of a sale.
If the time has come to implement your exit plan and sell, contact us for more information!
About A Neumann & Associates, LLC
A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or email@example.com