You’ve worked hard to build your business but what will you do when
the time comes to leave it behind? The right exit strategy can help you realise
the value you’ve built up in your business.
The Commonwealth Bank Local Business Owner Report found
only 47% of small business owners have an exit strategy and 22% of those
who do have an exit plan simply intend to close their doors
and walk away. That’s despite the fact that 60% of them are still actively
reinvesting profits back into their businesses, while half are working more
than 50 hours a week.
The closer people come to retirement, one in four business owners over 60
are planning to close their businesses.
Make yourself redundant
The issue for many people is their businesses depend on them personally. So,
when the time comes for them to move on, they have nothing to sell.
The best managers work to make themselves redundant. They put people and
processes in place so that the business runs whether they’re in the office or
not. Do that and you’ll have an asset that could be worth serious money.
To build a saleable business, you need to plan ahead. The best time to think
about selling your business is on the day you start it up.
The options
-
Put in a manager
By handing over the reigns to a manager, you can either retire or focus on
other business interests while still enjoying the profits from your hard work.
You can also step in if things start to go wrong. Do your sums to check if
you’d be better off selling the business and putting the proceeds into another
investment. Start by calculating your return
on owner’s equity.
-
Take on a partner
If you need extra capital now, and you’re looking to a time when you’ll want to
leave the business, then maybe a partner is the answer. Bringing fresh ideas,
capital and enthusiasm, a partner can take over the business when you want to
leave. Be upfront about your retirement plans and put a written agreement in
place, setting out the terms on which one partner can buy another out.
-
Sell it
Selling your business and pocketing a healthy profit can be done provided you
plan and have realistic expectations. Sometimes a sale agreement might involve
several instalment payments (rather than just a lump sum) conditional on the
business’ ongoing profitability. A buyer may also require you to stay in the
business for a time as an employee.
-
Hand it on to your family
This is often the preferred option for family businesses. They may be family
but you still need a formal, written agreement to protect your interests and
theirs. Consult your solicitor and accountant, and make sure you get paid fair
value for the business, even if it happens in several instalments.
-
Franchise
it
If you have an outstanding business, then a franchise could help you take it to
the next level without investing large amounts of capital. By becoming a
franchisor, you could turn your hard work into a household name. But you need
to work actively with your franchisees, making sure you get the right people on
board and support them with sales, marketing and production smarts.
-
Wind it up
If worst comes to worst, you can of course sell the assets, hang up the phone,
take down the nameplate and walk away.
Where to find out more
