What to Consider When Planning an Exit Plan from Your Business
Your business exit strategy – do it from day one
Making a business exit strategy is something you will probably want to do near the start.
It’s good practice whether you are starting your own new company, becoming a franchise or buying an existing business.
After all, whatever you’re doing, you probably aren’t going to want to do it forever…
When the time comes, knowing that you can get out in a way which maximises your own takeaway – not to mention being confident that your hard-working staff will be ready for it – is great for your peace of mind as well as your profits.
Here’s a simple business exit strategy checklist:
1) Make sure your processes are perfect
First of all, you need to have a company which people are going to want to buy.
When someone is buying a franchise or any kind of existing business, one of the things which will be running through their minds is how easy it is to visualise taking it over.
It’s the reason why all of the best-selling franchise opportunities will make it clear how straightforward they are to operate.
It’s also why a key part of your exit strategy needs to be defining all of your processes and documenting them…
For example, MBE takes major steps to lay out how and why the processes we use work to any potential franchisee. We want them to be able to imagine exactly how easy it could be to be in charge of one of our franchises.
Your goal should be to enable someone with very little knowledge to take over running your company tomorrow armed with your information.
You might want to think about creating:
- 1. Written processes for every aspect of administration
- 2. Specific job descriptions for each role
- 3. Process templates
2) Make sure the business doesn’t rely on you
How would your business function if you were not there to do everything tomorrow?
If you are creating an exit plan, the answer needs to be “absolutely fine, thank you very much!”
Your staff needs to have the knowledge and training to slowly take on every part of the jobs which used to be yours.
You might try by starting to:
- 1. Take more of a back seat in many situations
- 2. Delegate more and more authority in line with the job roles you created
- 3. Be less present generally
3) Make sure your accounts are up-to-date
When you are selling your business, any prospective buyer is going to want to see your accounts.
Two or three years of financial history is a fairly standard request, as far as time frame goes. So you need your last three years of financial records to be clean, clear and to show (as much as possible) that your business has the potential to be a profitable one.
Again using MBE as an example, we make sure all of our franchisees keep regular accounts – plus, we have a model which is focussed on helping each franchisee to develop their business.
This means that anyone checking the books of any existing MBE franchise which may be for sale will see many years of accurate accounts showing a growing business.
4) Make sure your valuation will be as high as possible
Ideally, you want to be considering the items which really add value to your business from day one. These will be things like:
- 1. Excellent products or services
- 2. Outstanding processes
- 3. Well-known trademarks or Intellectual Property
- 4. A solid customer base
- 5. Physical property
You will want to try and identify which of these really make your business stand out and grow them throughout its lifetime.
Then, when you know you are going to want to sell, get a guideline valuation to see how well you have done.
If this ends up being not as high as you were expecting, you might have to adjust your exit timeframe so you have enough time to grow more value.
5) Make sure your sales pitch is on the money
There are a few things that every good sales pitch for a business should include:
- Your business’s story – where did you start? Why did you start? How did your growth happen?
- Numbers – even a well-crafted pitch needs to be based on facts. A few good statistics can go a long way to making the sale part of your exit strategy a success, but be sure not to cherry-pick.
- The future – include predictions for future growth. Much like the change you are about to make in your own life, you want to make it clear that the business is moving onwards and upwards.