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How do you exit your business

Preparing yourself and your business for your inevitable exit from that business, whether by choice or fate, is one of the most neglected aspects we see in small and medium enterprises.

That being said, we believe an exit strategy is critical not only in ensuring you achieve the best possible sale price on eventual exit, but also ensures that you realise the best possible returns from that business while you’re still around.

But what is an exit strategy? Essentially it is a plan for wrapping up your continued and essential involvement in a business, and can also be called succession planning. Depending on the available capacity in the business or your personal mind space, it is something that could take years to put in place, so best to start with it as soon as possible.

What are the essential aspects of a succession plan?

  1. Define your planning window – how soon do you want out?

With a planning window comes urgency and focus. It defines whether you will exit at once or in stages, and also defines how resources should be concentrated in order to formulate the plan and execute on its ideals.

  1. Get your accounting and legal frameworks in place

Astute buyers, whether external or internal, will most probably want three years of accounting records in place and will require full disclosure around all business dealings when conducting their due diligence in order to evaluate the commercial potential of the business.

  1. Write down how things are done in your business

Standard operating procedures need to be documented, from simple things on how the shop is opened and closed on a daily basis, all the way through to how you can ensure that each and every client has the same service experience when dealing with your business. Templates for repeating tasks and formal job descriptions / detailed role clarifications for employees also form part of this aspect.

  1. Remove yourself from the equation

You will realise the best possible sale price on exit from the business if it can thrive without you. If you have staff, give them the training and authority they require and delegate as far as possible.

  1. Get a guideline valuation of your business

A professional opinion on the value of your business tends to manage not only your expectation of your eventual proceeds from an exit but also equips you with the requisite knowledge to ensure you can maximise the valuation of the business.

  1. Work on your elevator pitch

Present the story of how you became involved in the business, the journey that you had and why you want to exit, as well as the future potential in the business.

Use the numbers as corroborating evidence and incorporate external facts and statistics to support your view on future potential.

The best potential outcome of this succession plan might even be for you to remain involved, but then having a more profitable and efficient business – one where you don’t need to be there every day.

And should you indeed exit, you will be able to realise a better price and increase the chances of your legacy being continued in the form of a successful and sustainable business.

For assistance on putting an exit strategy in place, make sure to contact Arnold Scholtz at arnold@asl.co.za and remember that anything you do to benefit a future buyer will also benefit you.