Creating a business exit strategy
You’ve worked hard to build your business but what will you do when the time comes to leave? The right exit strategy can help you realise the value you’ve built.
Sadly, a good exit strategy is uncommon:
- The Commonwealth Bank Local Business Owner Report found that only 47% of small business owners have an exit strategy
- 22% of those who do have an exit plan simply intend to close their doors and walk away
- 60% of them are still actively reinvesting profits back into their businesses and half are working more than 50 hours a week, even if the business will close
- One in four business owners aged over 60 are planning to close their businesses at retirement
- 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
- For many business owners, their businesses depends on them personally so when the time comes to move on, they have nothing to sell
- The best managers work to make themselves redundant
- Put people and processes in place so that the business runs independently
- 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, a partner may be the answer
- A partner can bring in fresh ideas, capital and enthusiasm and 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.
As this advice has been prepared without considering your objectives, financial situation or needs, you should, before acting on the advice, consider its appropriateness to your circumstances. All products mentioned on this web page are issued by the Commonwealth Bank of Australia; view our Financial Services Guide (PDF 59kb).