At Streamlion, we’re well known for getting business owners started and business ideas up and running.
But, did you know, it’s just as important to give some thought to how you leave your business when the time is right?
An exit strategy is a plan for how you will end your involvement in your business. The business will continue, perhaps with new ownership. You may go on to start something new or you may be retiring. Whatever your reason for wanting to exit, it’s important you get a good return on your investment of time and hard work over the years.
Exiting your business – where (and when) to start
The first and most important consideration is to leave your business in the very best shape. That means good turnover and profits, yes, but it also means your admin needs to be up to scrutiny. Processes need to be documented, your books must be up to date and accurate, and so on. As you can imagine, some of these things take time to put in place so it’s never too early to start planning.
Apart from increasing the likelihood of your business lasting long enough for you to need an exit plan, putting in this planning and preparation will almost certainly get you a better price when you come to sell it.
The Main Ways to Exit a Business
For an entrepreneur or small business owner, there are several ways you could consider as your exit plan:
- Merger & Acquisition – you might join forces with a similar business to create a larger or more wide-ranging business and then make yourself redundant as a result, or, you might look to be acquired by a larger organisation who operates in the same space as you.
- Initial Public Offering (IPO) – this method looks to bring in shareholders who buy up your shares and effectively repay you and any other investors. However, this get-rich-quick scheme of old is less lucrative these days and no longer the preferred approach.
- Sell to an individual – this is different from a merger or acquisition because there’s no other entity in the deal, you’re simply handing over the reins for an agreed sum of money. Your ideal buyer would be someone who can take the business to the next level.
The method you choose will depend upon the type of business you have and the outcome you want from exiting. There are, of course, a myriad of other options, such as selling to your management team, passing the business on to family or simply shutting up shop and liquidating. It’s important to get good advice and consider every option carefully before committing to a plan.
Exit Strategies – Keeping It Real
We’d all love to be the next ‘Innocent Drinks-becomes-Coca-Cola’ type of success story but, in the real world, exit deals are often more modest. The most important thing, as a business owner, is to decide what you want from your exit and then engineer the best opportunity to achieve it.
Making sure your business is as automated as it can be is important, not just because it can drive a higher sale price. According to growthbusiness.co.uk, a massive 83% of entrepreneurs end up staying involved with the business they chose to exit. Now, in some cases, this will be part of the plan, as entrepreneurs reportedly continue in advisory or shareholder roles.
However, it’s clear that entrepreneurs still love the ‘art of the start’ as an incredible £108bn was made in sales during the 5 years to 2019 and, according to FreshBooks, 61% of baby-boomers say they would work through retirement by choice.
If you’re keen to explore exit strategies further, why not pick up the phone to Streamlion Consulting?