No matter how secure you are in your business, no matter how satisfied, no matter how you expect to go on forever, you have to be constantly planning for the day you will no longer own your business. You can’t wait until the last minute to put together a successful exit strategy.
That exit on the highway can come up very fast if you do not know the answer to the question: Where’s the EXIT?
The day you open your business is the day you start planning your exit strategy.
With that said, there are three stages to planning for your exit from the business: long-term planning (greater than three years); intermediate planning (from six months to three years); and short-term planning (less than six months). This article will cover what is required in the long term.
Develop management depth. Make sure that your employees are trained in all aspects of the operation so that if a key member of your management team leaves, a replacement is prepared to step in, with no discernible loss of productivity, until you are able to hire a new person or promote from within.
Perform appropriate tax planning. Your accountant or financial planner can take steps early to ensure that your tax situation is optimized for all present and future scenarios. Not only might you save money now, you will also be in better financial shape when it is time to sell your business.
Improve financial statements. Again, this is something all business owners should be doing as a matter of good practice. Nothing attracts qualified, motivated buyers more than a solid financial statement.
Formalize partnership agreements. Too many partnership deals operate on nothing more than a handshake and someone’s good word. While that might work in many cases, it is always best to reduce agreements to writing so that there are no questions about the terms and responsibilities for all parties involved.
Purchase any minority interests. Having several partial owners can complicate matters when it comes time to sell your business. As appropriate, try to reduce the number of minority interests in your business. They might have been beneficial when you were growing the business, but as your venture matures, consider buying out those who hold minority interests.
Negotiate lease transferability. Make sure that all your lease documents – property, machinery, intellectual rights, for example – allow for a smooth transfer to a new owner. As your business grows, your leverage to demand transferability of leased items grows also.
If you need help putting together a strategic plan, please contact the Benjamin Ross Group to speak with a business broker who can help you start the process.