Many business owners do not have a plan to exit their business. The day to day challenges of running the business tend to preclude any longer term planning. Whether you want to sell, or have a succession plan put in place, here are 4 things to consider when planning your exit:
- Evaluate Your Business: While you might not want to sell your business now, it would be a good idea to determine what your business is currently worth. If you have a selling price in mind, and you find that the current valuation does not equate to your exit number, then at least you have a reference point to begin with, and you can make strategic and tactical plans to build your revenue and profitability over the next few years to get the business to the value you wish to sell it for.
- Plan Your Exit Early On: Many buyers look for investment opportunities, rather than just buying a job. Plan to build the business to the point that it is independent of the owner and grow it with the end goal of selling the business in the future. Also, recurring revenues are key, so build up that loyal client base
- Document Everything: Knowledge of the business is vital to a buyer, so improve the ability to transition the business to a buyer by ensuring your processes and procedures are as well documented as possible.
- Taxation: Make sure you talk to you accountant about maximizing the ability of your business to minimize the tax on the sale of the business. Learn about share sales vs. asset sale of the business, as well as taking advantage of shareholder loans and tax losses in the business. Some businesses do have an unreported cash component (gasp!); perhaps you’d be better off recognizing more revenue on the books, in order to increase value.
Exit planning is a significant part of your business strategies; make sure you surround yourself with trusted advisors such as your accountant, lawyer, and Equitas Business Brokers to help you through the process.