A business exit plan can have several different connotations. You may hear it as an Estate Plan.

At Superb Coaching we have taken a deliberate stance in focusing on the ‘EXIT’ because we are dealing with the business owner’s plan to get out of business. Yes, there are issues related to succession management that we address; however, we believe the Exit Plan must address more than just succession.

Your business exit plan should meet the following objectives:

1) To maximize the realization of capital from the transfer of ownership

2) To achieve this realization in a reasonable time frame

3) Minimize risks as a result of the change or during the change period

In a survey conducted by the Australian CPA in 2004, it was found that business owners gave the following reasons for undertaking a plan.

  • Age (twenty-one%)
  • New business opportunities (eleven%)
  • Planning ahead/looking ahead (eleven%)
  • Good business practices/logic/common sense (9%)
  • Succession/business for children/I need it to continue (8%)
  • I wanted to earn more money/opportunity to grow (7%)
  • See to retire (6%)
  • I wanted to sell/stay too long (5%)
  • I wanted to get it right this time/I needed direction (3%)
  • Needs time with family/death in the family (two%)
  • Poor business performance (two%)
  • work overload (two%)
  • family breakup (two%)
  • Too much GST/tax (one%)
  • Illness (one%)
  • No real reason (5%)

In other research carried out in the UK, a number of main factors were identified that contribute to the failure of SMEs to exit. These included.

Businesses with lifestyle and personal goals more than strategic

poor business performance

Owner managerial dependency

Ignoring the need to make arrangements to get out

In Australia, around 40% of SMEs are fully owner dependent..

So what are your options for getting out of business?

SMB owners found the following to be the most attractive.

  1. Sell ​​or pass on to a child or other family member (25%)
  2. A business sale to someone in the industry (19%)
  3. Sell ​​to management or staff (7%)
  4. Advertise the business for sale without identifying a buyer (26%)
  5. Close the business and sell the assets (17%)
  6. I dont know (5%)

The most interesting thing is that if we compare the same previous list where the business owner was advised by a professional, we observe the following preferences.

  1. Advertise the business for sale without identifying a buyer (43%)
  2. Sell ​​or pass on to a child or other family member (30%)
  3. A business sale to someone in the industry (17%)
  4. Sell ​​to management or staff (3%)
  5. Close the business and sell the assets (3%)
  6. I dont know (4%)

Significantly, 43% of surveyed owners planned for a continuing stream of income from the business after exit. This is a double edged sword.

Homeowners not only want to maximize the value of the sale value, but are also looking for an income stream to support their future lifestyle.

It becomes clear that, in addition to the wide range of issues that need to be addressed, maximizing business value is paramount for anyone considering exiting their business.

The experience of Australian CPAs has found that barriers to maximizing business valuation for SMEs include:

The business depends too much on the owner.

Trading costs are too high.

outdated technology

The processes are not documented.

The business owner is not prepared to spend time preparing for a sale.

Lack of potential buyers.

The business does not achieve a reasonable return

The owner has unrealistic expectations about the value of the business.

So what can You do to maximize the value of your business and any ongoing stream of income you may be looking for?

You should develop your business exit plan making sure it is integrated into your company’s strategic plans. You need to involve yourself, your family and your staff. The most important thing is that you need to plan ahead.

At Superb Coaching we focus on implementing 7 key strategies for our customers

First of all, we make sure that our clients have a current Business Plan that is being put into operation. Next, we address the issue of the Business Exit Plan.

Does your business have the appropriate structure supported by a culture of leadership and team development that favors business objectives?

Do you have the right people sitting in the right seats on the right bus? Are lines of responsibility clearly defined and followed? Does the business have individual dependency points?

Are business systems supporting operations? Are they used effectively and do they work with business processes? Are there effective performance measurement systems?

Are systems and processes properly documented? Are business policies and procedures up to date and understood by staff?

Does your company effectively apply relationship management to select business partners to build your customer base? Are there opportunities to attract better qualified customers and increase turnover?

Your success in the marketplace will be driven by the market’s perception of what your business really is. Recognition of your position can only be achieved by ensuring that your company is fully aligned with this position in everything it does.

Yes, earnings, turnover, financial ratios, and asset value are also critical, but these are generally what is known as “Delay Indicators”. They only tell you what has happened in the past, the history of the business.

To maximize the value of your business, you should also pay attention to demonstrating the “future” business potential. This is accomplished by measuring “leading indicators“.

adopt the 7 key strategies and you can be sure that it will meet the future potential of your business.

Now your business is really attractive to a potential investor or buyer. They have security about past performance and confidence in future ability.

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