5 Tips in Taking a Backseat and Preparing to Exit Your Business

by Alex Izsak 3rd of November, 2022

5 Tips in Taking a Backseat and Preparing to Exit Your Business

You may not give much thought to an exit strategy until you are far into your business’s life cycle. Although longevity is the goal of every business owner, the time to move on will inevitably come. A vendor's sense of urgency is expected during the sale of a business, even though selling any business, no matter how big or small, is a time-consuming and complex process. Listing and closing a deal are only the beginning, which emphasises the importance of having an exit strategy.

It is a common misunderstanding that exit strategies are only relevant to business owners who intend to sell their businesses. Realistically, it also entails maintaining the security and profitability of the business you built. It could also be a long-term strategy to ensure the success of your business and its continuing legacy.

To that end, here are a few pointers to keep in mind as you work to lessen your business's dependency on your involvement and set up an exit strategy:

1. Limit the time you spend on your business

One of the best ways to keep costs down in business is to operate it yourself. Putting less weight on work-life balance may seem like the natural thing to do, especially for small businesses. However, this could be counterproductive in the long run, leading to burnout or a transient desire to do something else.

One strategy to lessen your business's reliance on you is to delegate more work to your staff. This will allow you to devote more time to working on the business rather than in it. More time out of the business means more time to brainstorm new ideas.

Since giving someone else authority to undertake your role in the business entails trusting them to do a fine job in your stead, it is important to establish instructions and expectations. You could deliver them verbally or in the form of a written manual before you begin delegating. Such could be used as training materials for future use and a resource that purchasers will appreciate when you decide to sell.

2. Understand what a purchaser will want to see

Potential purchasers will want assurances that your business can drive sufficient revenue to cover its acquisition cost. More experienced purchasers will likely assess your business for opportunities to increase revenue or decrease expenses to boost profits. You can present your finances in full force if you keep detailed records of your business's expenditures, invoices, works in progress, wages, cash flow and other financial transactions.

Keeping your physical assets in good condition can help you save money in the long run, even if you never intend to sell the business. The value of a business can be increased by having well-maintained, fully functional plant and equipment. In the end, no potential purchaser will be interested in a business that has been neglected.

3. Maintain healthy ties with your customers

While personal connections can benefit your business's growth, you need to ensure that your customers' loyalty lies in the quality of your products and services and not just due to your involvement in the business. Customers, especially those who have dealt with your business for a while, may feel they can only trust you and reject doing business with competitors. This is encouraging as it demonstrates that you have made a positive impression on your customers and are on the path to forming lasting relationships with them.

When you decide to sell, you must demonstrate that the business will not falter post-acquisition. If your business is less reliant on you and your reputation, expect to receive more interest.

Sign up to Newsletter

Weekly updates on business sales and advice, delivered to your inbox.

4. Post-sale income planning

There are a variety of motivations for selling a business. Retirement is a typical reason for owners that have worked hard all their lives and are now ready to relax and enjoy the fruits of their labour. Owners may simply be exhausted and in need of a rest. In any case, the sale of a business represents the discontinuation of a reliable and steady income stream.

If you were unable to develop a strategy for how you would earn money following the sale of your business, you could still take measures to increase the likelihood of a smooth transition. You could use the proceeds from the sale to take some time off and think about what you want to do next, provided that you are not planning on making a new investment yet.

If you are not yet of retirement age when you get the payment for your business, you should immediately begin making plans to diversify the profits. Investing in real estate, mutual funds, term deposits and stocks are all viable options.

5. Determine the most suitable Exit Strategy

In essence, you only have two ways to exit your business: shutting down or selling. The sale of a failing business can be challenging, prompting many owners to opt for shutting down entirely. When a business is closed, its assets are liquidated, debts are settled, and any remaining funds are retained by the owner. There are also a lot of legalities involved in closing a business which calls for a reliable solicitor. Also, do not neglect any emotional impact that may linger.

Ideally, you should sell when both your sales and profits are attractive. For a business owner, the decision to sell is as momentous as the decision to acquire. Choosing the right timing, price, and purchaser for your business, as well as evaluating all risks involved in the sale are just a few of the many considerations that must be made throughout the process.

Tags: selling exit strategy