If you manage an existing business and have never had an exit route planned you need to think about what your preferred exit might be. This will perhaps lead you to consider whether you could change the way in which you run the business in order to help you achieve it.
Dependent upon the business structure you have the way in which you exit can affect a number of crucial variables. These might include the value you and any other shareholders might realise from the business, whether you receive a cash deal, deferred or staged payments, the future success of the business and its products or services, whether you retain any involvement in or control of your business, and your tax liabilities.
Before you think about commercial factors relative to how you will exit your business, first consider personal concerns that were your reasons for starting a business and the type of business you set up. This knowledge will help determine your exit options.
Your objectives when starting a business might have included being your own boss, creating a business to pass on to family members, generating capital growth and making money from selling the business, creating an invention or piece of intellectual property and developing it and the business for sale.
For instance if you set up the business to fulfil the first objective alone, you may have unwittingly poured yourself into it. It may be you alone that determines the business worth as it stands. Your customers therefore may be less liable to follow and support the business if you are no longer involved.
Say you have a restaurant and are chef or front-of-house. Whether you can sell it as a going concern might depend on whether you still play a hands-on role. Or it may depend on whether you have put able staff in place gradually taking your place.
Customers, goodwill, and regular cashflow say a lot to a purchaser but if most customers still want you to cook their food, this will likely be found out, and it will be more difficult to sell the business as it will be harder for potential buyers to differentiate the business from you.
So if you have a potential sale in mind, it’s never too late to start refocussing the business.