If you’re a business owner, have you thought about what will happen when you sell your company? Have you considered what you want to do once you’ve exited the business, or how much money you will need to generate from the sale?
Given that your financial goals could rely on a successful sale of your business, it’s crucial that you have an exit plan in place.
However, despite the importance of doing so, a report by Money Marketing revealed that around 50% of UK business owners currently don’t have an exit plan organised.
So, read on to find out what an exit plan is, how it differs from a succession plan, and why you need to have an exit plan in place.
An exit plan is different from a succession plan – it’s important you know the difference
Essentially, an exit strategy will allow you to put in place plans for selling your business to another company, investors, or even your employees.
While you won’t necessarily know who you will be selling to at the time of creating the plan, it will enable you to truly understand:
- What you want to do once you’ve exited
- How much money you will need from the sale
- How the sale could affect you mentally
- The type of buyer you’re looking for
- The time frame of your planned sale.
Succession plans differ slightly. With many UK businesses run by families, owners may want the firm to continue in the hands of relatives and may be less concerned with the financial gains of selling the business.
With finances a key aspect of a successful exit strategy, it’s so important that you are aware of why you need an exit plan. Read on to find out four reasons why having an exit plan can help you successfully leave your business.
1. Having a plan in place can help you prepare for what’s to come
When you started your business, you may not have considered what you would do with it in the future. Yet, while running your firm, it’s crucial for you to think about what you want to do with your business and how you want to exit it.
This is where the exit plan comes in. By devising a plan for leaving your firm, you will be able to identify exactly what you want to do next, how much money you’ll need to achieve your goals, and how you want the transition to go.
For instance, are you retiring after you exit the business? If so, how much money will you need to pay for all the things you want to do during your retirement? Your exit plan would cover these sorts of questions.
Additionally, by having a concrete exit plan in place, you could increase the likelihood of a successful sale that generates the funds you need to do everything you want once you’ve left the business.
2. You could leave on your terms
Having an exit plan in place means that you could leave at a time that suits you and your business. Plus, you’ll have the peace of mind of knowing you’ve considered absolutely everything without external circumstances or your emotions influencing your decision.
Indeed, by having a predetermined time or moment at which to exit your firm, you will be more likely to avoid panic selling or making rushed decisions when emotions may be high.
Tied into leaving the right legacy, an exit plan could also help you to look after the wellbeing of your staff. You could even consider discussing the exit plan with them well in advance so that they know what’s involved and what will happen once you’ve exited.
3. You could increase your firm’s value and help fund your goals
Planning your exit well in advance could give you the time and opportunity to increase your business’s value and the chance of a substantial profit.
By understanding the sale process, what potential buyers are looking for, and making the business as profitable as possible, you could make your company more desirable for buyers. In the process, this could increase the value of your firm and generate the required funds to help you meet your goals.
4. You could reduce the risk of a failed sale and the stress that comes with it
With Forbes recently reporting that only 1 in 15 business acquisitions succeed, you must do what you can to reduce the risk of your sale falling through and the associated stress that comes with it.
In the same way that financial planning allows you to prepare for the future and protect your wealth, devising a comprehensive exit plan could enable you to prime your business ready for a successful sale.
By accounting for all variables and working closely with a financial planner, you could avoid the risk of the sale falling through or losing out financially. This is especially important given that changes in the economy or the market could happen at any time.
Working with a financial planner could help you prepare for any eventuality
Aside from offering you the peace of mind of knowing a professional is in your corner, working with a financial planner could also help you identify what your exit goals are. Plus, it could help you understand what’s involved in selling your business, as well as act as a sounding board for all your decisions.
So, if you’re considering selling your business but don’t know how or where to begin, speak to the experienced financial planners at Sovereign. We have wide experience of working with business owners and can help you devise a plan that helps you to achieve your ambitions.
Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
