As is often the case when entering into a business, the complete focus is on setting up, operating and growing the business. What is easy to overlook is the all-important business exit strategy.
An exit strategy is an essential component to a well-designed business plan, as without one you could be left with a business that you can't sell or is unsuitable to hand over when the time comes to move on. It may be surprising to note that a high percentage of businesses listed for sale do not sell for one reason or another, and owners simply close the doors.
Prudent business owners recognise early the importance of planning for their eventual exit from the business and for maximising the price they will receive. Clear goals and objectives need to be determined early in the piece and options considered.
Options Are Worth Weighing-up Early
Clear goals need to be set early, including when and how you'll exit - whether that's an outright sale, a progressive buyout, a merger, or bringing a family member on board. Never assume family will want to, or be able to, run the business - see Your Options When Selling a Business for a full comparison of each route.
Business Exit Strategies Are Not Set in Concrete
Your exit strategy needs to be flexible, since circumstances change. A good rule of thumb is to keep your business in saleable shape at all times, so that if the unforeseen happens - illness or an accident - a good price can still be realised. Reducing how dependent the business is on you personally is central to this; see 7 Ways to Increase the Value of Your Business and Business Processes: Make Your Business Easier to Sell for how to get there.
Cashflow remains arguably the most important component buyers weigh - see Valuing a Business for Sale for how that translates into an actual price.
Build a Life Outside the Business Before You Need One
Owning and running a business can become all-consuming, and it's easy to let family time, holidays, and personal interests slide for years at a stretch. The cost shows up later: owners who haven't built anything outside the business often find it genuinely hard to let go of it, even once a good offer is on the table, because the business has quietly become their whole identity.
Ask yourself honestly: if you sold tomorrow, what would you actually do with your time? Who would you spend it with? What have you been putting off? An exit strategy built purely around price and paperwork still leaves that gap unaddressed - and it's often what separates owners who exit smoothly from those who keep finding reasons to delay.
Why Have a Formal Exit Strategy at All?
Whatever your exit strategy, work out what matters to you and your business specifically - some strategies take considerably more time and thought than others. The most successful exit strategy is simply the one that delivers what you actually want and your best return at the end. That outcome seldom happens by chance - it happens because someone started planning for it years before they needed to.
Many business owners are lulled into the belief that they can wait until later to start preparing their business for sale. Unfortunately, as the years pass by, opportunities to enhance their business' value and position it for the maximum selling price can be missed.
Check out these links for more information on; Developing a Business Exit Strategy getting your business business sale ready or info on Selling a Business.
Frequently Asked Questions
Why do I need a business exit strategy?
Without one, you risk ending up with a business you can't sell or isn't ready to hand over when the time comes - a high proportion of businesses listed for sale never actually sell, often because the owner started planning too late.When should I start planning my exit strategy?
As early as possible. Many owners assume they can start preparing closer to when they want to sell, but opportunities to build value and position the business for its best price are missed the longer this is left.Does having outside interests actually matter for selling a business?
Yes. Owners who haven't built a life or interests outside the business often find it genuinely difficult to let go, even with a good offer on the table, because the business has become central to their identity.
List your NZ Business for Sale here.
OR if you're looking to exit your business soon, download a FREE Business Seller's Checklist.
By Richard O'Brien - nzbizbuysell
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