It’s wise to consider what your exit plan will look like, whether you’re just starting a business or about to retire. At some point, you decide whether you want to stabilize the business, grow or sell — or do some variation of it all until it is time to retire.
When should you consider an exit plan, and what should it look like? It depends on the end you have in mind. Here are six things to include in your exit plan.
1. Learn About and Conduct Business Valuation
Many company owners attach the success of an exit to a big payout. Some leaders may find themselves disappointed with sales prospects which can derive from not understanding valuation and how it is calculated.
You need more than steady revenue to capture the attention of a buyer. You need a strategic plan, solid services and products, loyal customers and dedicated talent, but so much more goes into it.
Many factors influence the valuation of a company, and it is advisable to conduct one business valuation annually.You will always know where your business stands and how it can stand to improve or grow. A business valuation gives you legs to stand on in a negotiation where you can point out areas of potential growth for a buyer. Plus, you learn more about how the whole mergers and acquisitions process plays out.
2. Get and Stay Organized
You will notice some areas of improvement once you conduct your business valuation. You can cut excess expenditures and fine-tune policies and processes. Get rid of unnecessary paperwork and red tape and improve the customer and employee experience.
By getting and staying organized you will save yourself precious time and unnecessary worrying. Start with records and reports. Conduct regular financial reports and audits. Update and file permits and licenses. Are all contracts with vendors updated to your mutual satisfaction? Doing all this now will save you less of a headache when it is time for the due diligence process.
3. Engage With M&A Advisers
It takes a certain level of guts, grit and confidence to achieve success as a company owner and leader. Your knowledge is valuable, but you are not a know-it-all.Big egos can quickly sink a deal or land your company in financial straights.
A little help can go a long way. Build a strong team to help you plan your exit strategy and the handing off of your company. A commercial real estate agent or general practice lawyer will not be able to advise you on the ins and outs of M&A.So, it is wise to work with existing advisers but also to form a relationship with an M&A company who specializes in your industry and particular needs. This will enhance the prospect of a successful exit.
You need sufficient time to plan for and exact your exit plan. If you do not act now, you could find yourself in a position where you or your constituents need to move fast in the case of unforeseen circumstances. If you end up rushing, you may be forced to accept a less than favorable deal.
When you time your exit, you can capitalize on the current market, steady revenue, the popularity of your products and the loyalty of your customers and employees.Circumstances change, but you can influence the conditions by paying close attention to what your business brings to the table for an interested buyer.
5. Focus More on Client Retention
Invest in your employees, but also invest in your client relationships. When too few clients hold sway over your revenue, you risk the downswing of your business towards failure.
Nurture the relationships you have, and find out more about the needs of each client and how you are fulfilling them. Increased loyalty in your customer base adds increased value to your business.
6. Decide What Life Holds After Your Exit
Chances are that your exit plan strategy has included thinking more about the business than your personal needs and growth. For a leader, the work-life balance can be especially elusive.
Decide what life will hold for you after your exit. Do you want to run another business, even if that is solely as a consultant? Do you want to travel? What about your estate and family? What do you want and need?
Your exit plan includes more than financial reports, contracts and buy and sell agreements. People continue to be your greatest asset — from those who you employ and provide services for to the team you will assemble to see you through the process.
Contact Sun Acquisitions today at (773) 243-1603 to learn more about the ins and outs of M&A from the experts, and find time to consider what exactly comes after your exit.
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