Anyone can create or build a business. But how do you exit the business successfully? The decision of whether to exit your business or not, is never a simple decision.
Most business owners hesitate or even procrastinate when making decisions about succession and transfer of business ownership’s. It’s natural to avoid thinking about matters that are unpleasant, such as death or disability. In most cases, it is not just one decision, but there are several interrelated decisions to grapple with, for example, how much money will you receive upon exit? What is the best timing for the exit, given the economic cycle? What kind of CFO advisors will you need? What will happen to your staff, customers and business partners?
In reality, Business Owner(s) are so caught up in the day to day management of the business that there is a tendency to prioritise matters that are urgent over matters that are important. Sometimes, things can happen unexpectedly – People become disabled; people die. Even if your business is in growth mode and you have no thoughts of retirement, you still need to deal with the contingencies of a forced exit. Peace of mind and security for you, your family, your business partners and employees – these are all reasons to think about your exit plan NOW well before you time the date of your exit.
Fortunately, today, there is a growing body of knowledge on Business Exit Planning. There are an overwhelming number of options available to Business Owners – options for those who want to exit in financial sense but remain active in business; options for those who no longer want to be active, but may want to remain invested in business; and options for those who want to sever ties completely.
Business Exit Planning is the process of defining exit-related objectives and strategies of the Business Owner(s), followed by a road map that takes into account all personal, business, financial, legal, and taxation aspects all in the context of planning the succession and continuity of the business. Objectives may include maximising (or setting a goal), minimising risk etc. The strategy will usually include the mode of exit envisaged (i.e. sale, going public, selling to management, transferring to children etc.), marketing, tax planning and timetable. The strategies should also take into account contingencies such as illness or death of the Business Owner (s).
Generally, a Business Exit Plan would document the following:
- Summary of business & personal objectives for seeking a Business Exit?
- Estimated business Valuation (according to appropriate valuation methodologies) base don existing operations
- Actions to improve the business’ profitability, management & cash flow to improve the business’s value & attractiveness to potential investors or buyers
- Business Exit options to be considered? The pros and cons of each option, along with the likelihood of success.
- For a sale – Identification of potential groups or companies that may be interested in the business
- Issues related to Tax and Estate planning, minority shareholders or financing arrangements that may impact on the exit options
- Contingency plan (if death or disability would occur, what changes in governance you would want in your company?
We understand that most Business Owners find the subject of Business Exits excruciatingly difficult and burdensome. We have experienced advisors across Australia ready to help you with your Business Exit planning.