In the excitement of setting up a new business, many entrepreneurs overlook one of the most vital details. This includes their exit strategy.
When you’re no longer interested or capable of running the business yourself, or if the business has moved so rapidly that you can no longer provide the best value to your shareholders or clients, then it might be time to get out. And when it comes time to exit your business, you want to ensure you’re set up to receive the most profit possible.
Different Types of Exit Strategies:
- Buyout. This is when a planned successor (such as a family member or staff member), becomes the new owner. Or you sell off your shares to your business partner.
- Acquisitions. Unlike a buyout, the acquisition means an outside investor acquires the company.
- Merger. Two companies merge into one to offer new or complementary products/services.
- IPO (Initial Public Offering). Shares in a company are sold to the general public, creating a public company from a private one.
- Run Dry. A strategy whereby the owner pays him/herself a large salary and keeps debt low until such day when he/she decides to liquidate the business.
- Liquidation. Selling off all assets of the company, paying off debts, with the remainder divided among shareholders. Liquidation is usually not the desired outcome but can be a good contingency plan.
How to Prepare Your Business For Sale
When setting up your business, always think about how to maximize sales potential down the line. The more advanced planning you do, the better your business looks in the eyes of potential buyers. Here are some tips for creating a desirable business:
Market your business for sale using the appropriate channels
When creating an exit strategy marketing your business for sale is one of the most important steps to have covered if you are interested in selling your business, you will be pleased to hear that marketing a business for sale can be very cost-effective these days there are many directories of businesses for sale that charge a low fee to create a business listing to start generating leads from relevant parties that may be interested in buying your business.
Hire a Good Accountant
If you’re going to sell your business, the first thing any potential buyer is going to look at is your books. So make sure your financial house is in order. A good accountant will also be able to give you advice on the best business structure and presentation method for your business to minimize tax commitments.
Create a Standalone Brand
When I started out in business, I was a freelancer. I love what I do, and the freelance life has definite advantages over the 9-5. I can work from home, make my own hours, and take on the types of projects I enjoy.
The problem with freelancing is that it’s not a scalable business model. It relies on me – as the owner and producer – for success. I can only earn as much as the speed at which I can produce work, and it’s my particular style that clients are paying for – so the work MUST be done by me. If I want to take a holiday or focus on a personal project, my income takes a nosedive. My business is inherently tied to my lifestyle and personality, and that’s not something I can on-sell.
To solve this issue, I re-branded my freelance business as a company. The business name no longer contains my name, and the company’s branding is distinct from my style. I now have a more desirable business structure if I want to scale up or sell in the future.
Make the Changes NOW
Trying to implement changes when you’re ready to sell isn’t going to help. The changes won’t have time to make an impact on the business. If you know you need to update your communications, re-brand the website or recruit new talent, then now is the time to do it.
Simplify Your Systems
To create a high number of interested buyers, you need to make sure that anyone can run your business – without needing specialized skills. Put systems and qualified staff in place to ensure the business runs efficiently without requiring lots of intervention on your part.
Focus on Growth
Create a business plan that focuses on growth, and make sure your business is set up in such a way that it is able to accumulate that potential growth. When someone buys a business, they’re not just buying what it is now; they’re buying its potential – so make sure a potential buyer can see obvious future potential.
Minimize Costs and Overheads
One of the easiest ways to show a potential buyer a better profit figure is to find ways to cut costs and overheads. This can be as simple as changing your company cars to cheaper and more fuel-efficient vehicles or changing suppliers for a better deal.
There are plenty of things you can do to ensure your business looks good to potential buyers. The more attractive your business looks from the beginning, the higher the chances of you finding the right buyer when you’re ready to sell.
Do you have an exit strategy in place?
Steff Green is a writer, blogger, and illustrator currently living in a slice of rural paradise in New Zealand. She writes about blogging, search engine optimization, and email marketing tips at SEO Training.
