Plotting an exit route? You need a clear route map
Exiting a business is not an easy decision for any owner – but planning a proper exit strategy should be.
Putting such a strategy place will help when it comes to decision making and will make the process, when it happens, easier and more profitable.
The map to the exit that you have created then needs to be continually revisited to ensure it still fits with your situation and your personal goals, as they can change over time and depending on the performance of the business.
Creating a clear exit strategy requires both time and care. Business owners need to be clear of their financial goals and how long they want to stay involved.
Getting an accurate picture of your finances – both personally and professionally – is important.
This will play a central part in your deliberations as you look at considering your exit options. Looking at several different strategies will help you decide on your best route out.
If your business has investors or other stakeholders, you need to keep them informed of your intentions and the strategy. Investors will want to know how they will be repaid.
Deciding what kind of exit can be challenging and again time and care is needed to get this right.
Do you want to sell? If so, have you a buyer in mind? Is a management buy-out an option? Or do you want to sell to your workforce through an Employment Ownership Trust?
If it is a family business, are you planning to hand over the reins to the next generation? Or will you liquidate and close the business?
It pays to design several exit strategies before picking one and committing to it. This will help provide clarity.
If the decision is to sell, having the right team around you is paramount. Build an exit team that can support you – not just in terms of business strategy and corporate law, but emotionally.
When it comes to exiting a family business it is important to talk – and listen – to those who will be affected by your decisions. Deciding on a gradual handover or a complete break will often depend on the dynamics of the family.
Don’t just assume that the next generation wants to take over. And if they do, they may very well have their own ideas about the direction the business should take. That is why open lines of communication are so vital.
For owners that have spent decades building up a business, leaving can be an emotional experience. It is important that those emotions don’t cloud judgement, so again be sure to take advice.
Also, the best exit strategies don’t end at the point of sale. You need to look at what happens the day after you walk away for the final time – what do you plan to do next with your life?
The key to a successful business exit often lies in the smoothness of the transition. That is why once again early planning and good communication are both vital.
The business may be losing one, if not two, of the key people that have been instrumental in its development, who have a lifetime of business experience, contacts and technical expertise.
These retiring family members may be central to the businesses culture and branding so their sudden removal could be disastrous.
Early planning is therefore important to ensure the new owners, or other key employees in the business, gain the necessary qualities and build trust with the various stakeholders.
Often a transitional period works well, where certain tasks or relationships are gradually released, at a pace that is appropriate for the business and the people in it.
This may be slow at first as people learn new roles and responsibilities but if handled well, will allow the new owners and promoted staff to feel empowered in a way that may have not been possible or foreseen and lead to better motivation, innovation and growth.
Usually, a gradual withdrawal helps both the original and new owners get maximum value from the business and leads to fewer problems both for the business and the family.
A life in business can be a difficult habit to break and it can be difficult to stop “interfering”. It can prevent the next generation taking full “ownership” of the challenges the business faces. Sometimes a clean break is necessary.
Again, a compromise may be possible. Larger companies will often have a board of non-exec directors who will not be involved in the day-to-day running of operations or decision making.
They are there to help the management and operational directors keep on track, see the wood-from the trees so to speak, allowing their wider experience and knowledge from other businesses to be of use.
Such a role is often ideal for the outgoing shareholders within a family business because they can enjoy the freedom of retiring from the everyday demands of the business but still offer help to the new owners in the family.
The help is from a trusted source who is less likely to have their own interests in mind, so it can be welcomed.
• Getting the right professional advice and support is vital in creating the right exit strategy for you. To discuss your options please contact me on 01772 430000
