This January 2020 article sets out three starting points for a business exit: define personal goals, discuss them with a trusted adviser and obtain a business valuation. Its New Year references belong to 2020; preparation time depends on the business and the intended exit route.
By Tony Vaughan · Published · Last reviewed
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The New Year is now upon us, bringing with it the opportunity for new beginnings and the desire to plan ahead for the future…
Many people have already begun making small steps in their journey towards fulfilling their New Year’s resolutions and it should be no different for business owners. Make 2020 the year to start considering how and when you would like to plan and execute your business exit.
Owners may benefit from preparing several years before an intended exit, particularly where succession or operational changes are needed. There is no fixed preparation period or guaranteed outcome. In the context of this January 2020 article, the following three steps provide a starting point:
- Establish Clear Exit Goals and Objectives
Set personal and financial exit goals
It’s important to begin establishing your exit goals and objectives sooner rather than later. This is so you can start putting plans in place to attain those goals and then persevere to see the plans through to completion. These exit objectives don’t need to be a detailed thesis; simply put pen to paper and begin jotting down a few notes. Below are a couple of questions you might want to consider asking yourself:
What is the desired amount you need to maintain your lifestyle? Think about your monthly expenses and work backwards to figure out the minimum amount that is needed to fund your lifestyle or future goals.
What does an ideal transaction look like? Do you want to sell all your shares and leave, or remain involved for a defined handover period? Consider how a phased departure would affect your income and responsibilities.
Who is your ideal buyer? You should identify your ideal buyer profile (competitors, family, employees etc) and develop a list of actions that you can implement to improve the attractiveness of the business to these specific groups.
- Speak to a Trusted Advisor
Discuss your objectives with an adviser
When you started your business, it was not with a written plan but with an idea of building something great. Similarly, exit planning begins when you start to think about all the great things that await you after you have moved on from business ownership. So tell a trusted advisor whose opinion you value and trust about your exit plans and the objectives you have established. The biggest benefit of doing this is it creates a powerful catalyst for change and makes the process very real. This person may be your lawyer, accountant or mentor. Get their thoughts on how realistic your objectives are. They may know of another professional who can help you in the process.
- Get a Business Valuation
Use valuation to test your expectations
If you haven’t done so already, seek a professional to help you appraise and value your business. This is vital to help you identify how much your business is worth by providing hard financials that will give you a better understanding of where your business is at, as well as your options with regard to how you will execute your exit. For example, if your business is both growing and popular, you are likely to have a better prospect of selling it for a higher price. Therefore, business valuations are a great way to reveal your company’s strengths, weaknesses and opportunities for growth.
Understand your options before deciding. If you would like to discuss your own circumstances, you can request a confidential business exit review; enquiries are reviewed by experienced advisers who can discuss suitable options.
Common questions
Why does this guide refer to starting an exit plan in 2020?
It was published on 14 January 2020 as a New Year planning article. Its calendar references are historical, not recommendations to use 2020 market conditions today.
What should an owner write down before seeking exit advice?
Record the income you need after leaving, your preferred timing, whether you want a complete or phased departure, and any priorities for staff or family.
Is three to five years a required exit-planning period?
No. Several years may be useful for succession and operational changes, but there is no universal preparation period or guaranteed sale timetable.
Can a valuation tell me the price I will receive?
A valuation provides an informed range based on evidence and assumptions. The eventual price and net proceeds depend on buyer interest, deal terms, costs and tax.
General information from our archive, not personal advice.
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