Exit Planning Is Essential
- Feb 23, 2023
- 4 min read
Written by: Christine Nicholson, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
100% of business owners leave their business, so why do so few plan for it? Exit planning adds value to your business even when you aren’t immediately thinking of leaving your business. Most business owners have sizable portion (if not all) of their retirement funding tied up in their business and yet have no clear idea or plan for how they are going to get it out. An exit plan is a great way to identify, protect and increase the value of your business now, for an easier, bigger payday at the end.
Successful exits come from planning and preparation. One of the biggest factors in a business failing to sell is not being prepared ‒ either as a business or as a business owner. Even those businesses that do get sold often could sell for more money, on better terms and through an easier process if the essentials of exit planning were in place. Are you going to leave money on the table that could be in your pocket? Are you making a future exit more stressful and less likely to succeed? Some of the reasons for lack of exit planning include:
Thinking "I'm never leaving my business"
Don’t know where to start
Lack of skill or knowledge about the exit journey and process
Thinking it won’t make a difference
Not enough time
It’s too expensive
Any exit planning is worthwhile if it is then supported by appropriate and timely actions. Planning for planning’s sake is an excuse for procrastination – the thief of time!
Here's how to get started...
Why do you need an Exit Plan?
Exit planning adds value to your business even when you aren’t immediately thinking of leaving your business.
Most business owners have a sizable portion (if not all) of their retirement funding tied up in their business and yet have no clear idea or plan for how they are going to get it out. An exit plan is a great way to identify, protect and increase the value of your business now, for an easier, bigger payday at the end.
Successful exits come from planning and preparation. One of the biggest factors in a business failing to sell is not being prepared – either as a business or as a business owner. Even those businesses that do get sold often could sell for more money, on better terms and through an easier process if the essentials of exit planning were in place.
Are you going to leave money on the table that could be in your pocket?
Some of the reasons for lack of exit planning include:
Thinking "I'm never leaving my business"
Don’t know where to start
Lack of skill or knowledge about the exit journey and process
Thinking it won’t make a difference
Not enough time
It’s too expensive
Any exit planning is worthwhile if it is then supported by appropriate and timely actions.
Planning for planning’s sake is an excuse for procrastination – the thief of time!
Exit planning is a complex and multi-faceted process that requires careful consideration of a range of factors.
Some of the key challenges that you may face when planning an exit:
Timing
Determining the right timing for your exit, considering factors such as market conditions, the health of your business, and your personal circumstances.
Value
You need to determine the fair market value of your business to set an appropriate asking price or negotiate the best deal possible.
Buyers
You may have difficulty finding a buyer for your business, especially if it is a niche operation or the market is not favourable. Most of you will already know your potential buyer, even if you haven't thought about it consciously.
Terms
Once a buyer is found, you need to negotiate the terms in the deal, including the sale price, payment terms, and other conditions. You especially need to think about what you want to get out of it personally and what terms you are willing to tolerate.
Tax
You need to be aware of the tax implications of selling your business, including capital gains taxes and other liabilities.
(Note: there are ways of selling your business completely tax-free!)
Transition
You need to manage the transition of your business to the new owner, ensuring a smooth and seamless process that minimises disruption to your employees and customers.
Letting Go
For many of you, the business is a significant part of your identity, and letting go can be an emotionally challenging process. Your business is NOT your baby!
Post-exit Life
You need to plan for their post-exit life, including how you will spend your time and what financial resources you will need to maintain your desired lifestyle. Many business owners find it difficult without a compelling purpose in life which has been provided by their business for a long time.
Exit planning can be a complex and challenging process, but with the right planning and preparation, business owners can ensure a successful outcome.
Christine Nicholson, Executive Contributor Brainz Magazine
I am Christine Nicholson, an author, speaker, and award-winning Professional Business Mentor who works with multi-million turnover business owners of technology, engineering, or product/services businesses.
I'm UK Business Mentor of the Year 2021 and a Global Top 50 Woman in Accounting. I've appeared on BBC talking about business!
0333 567 8011
