Exit Planning
“The best day to create an exit plan is five years prior, the next best day is today.”
Exit planning is crucial to increasing the value of a company for when a business owner opts to sell, if this is something you have yet to create then there is no better time to consider making an exit plan.
What is meant by an Exit Plan?
Exit planning is a strategy that prepares business owners for when they opt to exit their company. The aim of an exit plan is to maximise the value of the business prior to a sale and therefore increase the financial reward for the selling business owner.
What are the five exit strategies?
There are five main exit strategies, these are:
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Initial Public Offering (IPOs): this is when a privately owned company lists its shares on a stock exchange allowing these to be bought by the public.
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Outside Sales: finding an external buyer to purchase and run a business.
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Management Buyouts: when a businesses management team source financial resource to purchase all or part of the company.
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Employee Stock Ownership Plan (ESOP): when employees own stock, whether they have been purchased directly, given as a bonus or obtain stock through a profit sharing plan.
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Transfer of Ownership to Family: passing legal ownership of the business to family.
You can find more details on the five exit strategies and the pro's and con's of each within our dedicated blog: 5 Exit Strategies for SMEs.
What are the benefits of an exit plan?
In the long term, creating an exit plan shows business value to purchases and ensures maximum value for when you are in a position to sell your business. In the short term, an exit plan allows a business owner to stay on track with the business objectives and goals.
We have written a blog post: 4 Reasons to Create an Exit Plan Right Now, which details all the benefits to creating an exit plan for your business.
What do I need to create an exit plan?
Read What to Include in your Business Exit Plan to see our full article on the subject, but to summarise you will need the below to create an exit plan:
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An outline of your target buyer - by knowing who your target buyer is, you'll be in a better position to shape your exit plan. For example, the timeline and selling price will differ if you're selling to family as opposed to selling externally.
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The date you’d like to exit - we know you may not have a specific date in mind at this point, but an z general idea will be helpful when creating an exit plan. If you are selling to family, their ages may play a part in determining the exit date.
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Your accounting records - by keeping this information to hand, you are prepared when it is actually time to exit as buyers will want access to this information from the years leading up to the sale.
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Your business processes - regardless of who you are selling to, you will likely need to provide a handover of business processes. Having this collated will help you when you decide to exit.
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Business valuation - an understanding of the business valuation will help you keep realistic expectations in mind when creating your exit plan. If you are creating an exit plan years in advance then this is something you need to keep up-to-date.
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Expert guidance - a great exit plan needs great guidance. With access to part-time or full-time FD's, The Finance People can assist you with creating your exit plan to ensure an optimal outcome when you do decide to exit your business.
How can The Finance People help with Exit Planning?
If you are without an exit plan, now is the time to change this! The Finance People have hugely experienced finance experts on hand to support you (part-time or full-time) in creating your exit strategy. Get in touch for a complimentary consultation to discuss how we can help your business.
Additionally, we are able to further support you via our guide to exit planning, available to download.
How we can help
At The Finance People, we provide flexible and affordable finance expertise to SMEs and startups. Our team of Finance Directors, Finance Managers and Finance Controllers work with your business in line with your requirements - anywhere from 1-3 days per week on a flexible contract. Get in touch to get started.