Beginning with the end in mind is one of the best productivity hacks. For small business owners, there is huge potential in thinking about your exit plan long before you choose to step away. Early planning can improve your exit process, business valuation, and financial outlook, as well as help you be more efficient while you're still driving things.
The what and why of exit strategies
An exit strategy aims to help you minimise losses and maximise profit when you‘re ready to leave your business. Selling your business is often the first thing that comes to mind, but a merger, passing the business to family or a staff member, and liquidation are also options. To get the best from your exit strategy, it's worth understanding your 'why' – what are your goals and priorities for the process? A good place to start is by thinking about what you want for the next phase of life and its timing.
Any exit approach you choose will require particular efforts and lead to certain implications and benefits. Here are the most common.
Selling the business is where many people focus their exit planning. If this is your aim, consider who might buy it and what will make it attractive to them. You may consider competitors, a larger, complementary business or an individual.
A merger or acquisition will be a good option in some cases. If your business performs well, has a loyal market share, or has strong intellectual property assets, this approach may allow new growth and access to different resources.
Passing the business to a family member or insider can have an emotional advantage, especially when you’ve put so much of your heart and soul into nurturing your company.
Liquidation is considered a last resort, but with the right strategic mindset, it has some benefits. It allows business owners to methodically dismantle their business and risk responsibly and deliberately.
When you're ready to select an exit strategy, you'll need to consider a range of factors before taking the next step. Your Business Mentor is a great sounding board for this process. They'll prompt you to consider economic conditions, the business's financial performance and market position, along with your own situation and energy levels. Here are some other elements to look at.
Tax implications
You'll need to understand any tax obligations you'll face should you be selling shares, meeting GST requirements, or selling off assets. A professional tax advisor can help you learn more about this.
Emotional impact
Like running a business, exiting a business can be an emotional journey. The preparation, process and finalising will demand your attention and skill. You'll face changes to how you spend your time and perhaps even your sense of identity. Recognising this aspect and allowing for it can help smooth the process.
Guidance from someone who has been through an exit themselves is priceless. Your Business Mentor will be able to offer unique context and insights from their own experience.
Whatever your exit strategy is a vital component of your business plan, allowing you to exit while maximising profits and minimising losses. Whether you plan to sell, merge, pass on your business, or liquidate, understanding your goals for post-business life is crucial. Each exit path requires different preparations and offers unique advantages and challenges.
Consulting with a Business Mentor and carefully considering the financial, legal, and emotional aspects of your chosen path will equip you to make informed decisions. A well-planned exit strategy empowers you to transition smoothly and confidently into your next phase of life.
