Planning is key
It might seem strange to be thinking about exiting your business while it’s still in a start-up or growth phase, but the reality is that you’ll step away from it at some point. There are any number of reasons why: you’re retiring, you’ve been offered a great price for it, or you’re handing the reins to family or to someone on your management team. Whatever the reason, it’s important that your business is always in good shape to sell or pass on.
What you don’t want is to have to organize your business for selling at the last minute. You never know when an unexpected offer might pop up, or something may happen to you that prevents your continuing with it. Either way, you need all your ducks in a row, so planning is essential and something that should be done early on.
It also means the customer has been given an option to pay the way they prefer. Anything you can do to enhance your customer experience means they’re more likely to come back – and to tell their friends about you.
The row of ducks
There are some essential factors to consider when planning your exit. These are the important things to make sure you’ve got sorted before you tell anyone you’re planning on a change. In other words, as the Boy Scouts say, be prepared:
- Decide when your exit will be – something may come along to speed this process up, but you should have a clear idea, all going well, of when you intend to leave the business and how you’re going to exit – by selling, by handing it over to someone else, or by stepping away from the day-to-day management. Take into consideration your family, finances, health and the state of your industry.
- Forecasting – predict your expected net profit over the coming year so you can determine how healthy your business is. Then you can take steps to improve it, so it becomes more attractive to potential buyers. It’s also a good idea to conduct a cash flow forecast – we’ve got a guide and template that can help you do this.
- Document processes – write everything down so that the new owner can run your business without you. Create manuals that outline all your operating processes.
- Increase customer loyalty – you want to be able to reassure buyers that customers will keep walking in the door. Focus on improving your customer experience so they keep coming back.
- Talk to experts – make sure you’ve got your accountant, insurance agent and lawyer fully involved in the process, because there’s always a lot to consider in terms of paperwork and legalities.
Succession planning
- Let them watch you work. They need to learn as much as they can.
- Dip their toes in by letting them make some decisions, with your guidance.
- Document processes – write everything down so that the new owner can run your business without you. Create manuals that outline all your operating processes.
- As they gain in confidence and ability, give them more decisions to make, with you as an advisor rather than guiding them. Let them make mistakes and show them how to fix them. It’s the only way they’ll learn to deal with failure.
- Give them total control. Give them the confidence to be truly ready to run the business without you.
When all is said and done, successfully exiting your business comes down to planning. The sooner you put your plans in place, the more successful it’s going to be. And you need to take a deep breath to do the hardest part of all – walk away. Once you’ve let go – let go!
Additional resources
At Meridian, we’re big on small business. Learn about our small business banking solutions.
Talk to one of our Small Business Advisors. They’ll take the time to get to know you and your business, and can help tailor financial solutions that fit your needs.
