Your Business Exit Strategy in 9 steps

What is a business exit strategy?

An exit strategy is a plan for wrapping up your involvement in a business. For most people, that means readying the business for a change of owner. Executing a well thought-out exit strategy can increase your sale price, while ensuring the business continues to thrive after you’ve left. This can also be called succession planning. What does it involve?

Succession planning definition and goals

The aim is to leave your business in the best possible shape for a new owner. That means it should be operating at peak profitability, the books should be spick and span, and all your processes will be written down so a stranger can come in and run the place. Oh, and the business won’t need you anymore – no matter how important you once were.

It takes years to do all this. That’s why it’s never too soon to start on your succession plan, or exit strategy.

How to sell a business

Business advisors and brokers recommend these nine steps to help get a succession plan in place.

1. Pick a target buyer

There will be different priorities depending on who you’re selling to. If it’s family, take pains to make everything transparent and fair. You don’t want the transaction to cause tension or conflict between children. If you’re selling to staff, be prepared for staggered payments. They’ll probably start with a deposit and pay you the rest from business income. If you sell to the highest bidder, then get all your records in order as otherwise they won’t have any idea how you operate, or what sort of money you make.

2. Decide how fast you’ll want out

Some buyers, such as family or staff, won’t have the cash to buy you out straight away. You might have to keep an interest in the business and stay involved to protect your investment. If that’s the case, you’ll need to negotiate consulting fees. If you want a clean break, you’ll probably be better off selling on the open market.

3. Get your accounting sorted

Smart buyers will ask to see at least two years’ worth of clean and dependable financial records. If your bookkeeping isn’t all it could be, get it fixed now. And if there’s something you can do to improve profitability, do it as soon as possible. You want that upswing to show in your accounts as a sustainable trend rather than as a recent spike. Use our balance sheet template to help get things in order.

4. Make yourself redundant

No one’s going to buy your business if it can’t survive without you. If you have staff, give them the training and authority they need to succeed. Scale back your involvement. Be less available to customers and clients. Delegate big decisions. Go into work less often.

5. Ensure your business is a well-oiled machine

Ensure you have formal (and efficient) processes for getting work done. Who does what, when, and how? Make sure there are protocols to guide all this. Potential buyers will be impressed if some things in your business happen automatically.  

6. Write down how everything happens in your business

Write a “how-to” manual for your business, so that a stranger could pick up the reins and run everything tomorrow. Record every process, including admin. Make a note of the steps you follow for each of these tasks. While you’re at it, write formal job descriptions for employees. And create templates for tasks that are repeated in your business.

7. Figure out how to drive up the valuation of your small business

What are the things that make your business great? Do you have a really outstanding product? Loyal customers? Amazing intellectual property? Find the strengths in your business and grow them, so that they become even more valuable. Similarly, figure out the biggest holdbacks and fix them. You’ll need someone from outside the business to provide this assessment. Get your accountant involved. If they don’t have the particular skills you need, they may be able to recommend someone who does.

8. Get a guideline business valuation

You won’t know what you’ll get for your business until the day it’s sold, but you can get a rough estimate. Ask for a professional opinion. Your accountant should be able to introduce you to someone, or you could search for a local business broker. A guideline valuation will help satisfy your curiosity and set realistic expectations. If they predict a lower price than you’d hoped, you might delay your exit, and spend some time building value in the business.

9. Work on a sales pitch

Buyers need to be excited by your business, so come up with an elevator pitch that captures the essentials. Craft a story that explains why you got started, how you’ve grown, and what you’ve achieved. Paint a positive picture of the future, too, but keep it real. Incorporate stats and facts to support what you’re saying.

Exits happen

Exiting your business is inevitable. It will happen whether you’re in control of it or not. So make a plan now and start getting your business ready for the next owner. It’ll help you command a better price, and increase the chance that your business survives.

And remember that anything you do to benefit your future buyer will also benefit you. You’ll have a more efficient, profitable and easier to manage business.

It’s never too soon to build a business exit strategy. Speak to us today and let us help.

Book a Complimentary 1 Hour Consult

What our clients say

DFK have supported us for many years and the service has been great across various partners.

MAHA Australia & New Zealand

We have found DFK OGC’s approach to everything from services provided to how they build relationships one that had worked well for them. We’ve found them to be down to earth, obviously knowledgeable about what they do and approachable as well. They always welcome the phone.

Any time I need them – any of the partners – they’re there to pick up the phone.
And they provide that service after hours as well, which is just great.

Dipak Bagia – CEO Petrochem Group

Brilliant team. Extremely helpful and professional business attitude.

Mehernosh Kotwal

Extremely professional and astute business advisors. Our businesses has benefitted and elevated to new horizons with DFK OGC by our side. Even when going gets challenging, they are open to seek subject matter experts. Anit Patel and his entire team are great highly recommended.

Sanjai Bagia

It’s not so big that you feel like just another number, but it’s also big enough that they can cover everything I need.  I feel comfortable with the fact that as my business grows, DFK OGC will be able to handle the demands that come with it.

Lee Chang Woo

Very efficient and has a personal touch. If you have questions, they respond in a timely manner and even visits you to explain things face to face.

Marlo Camacho
Previous
Next