Why don’t most businesses have a defined exit or succession plan? For many business owners it’s simply that they don’t want to face the inevitable fact that one day they will leave their business. As we all know the harsh reality is that one day we will all leave our business, whether that is in a planned and co-ordinated way or to put it bluntly “in a box”. Which method do you prefer?
“Facing my retirement is my biggest fear.” That’s the message I’ve heard from hundreds of business owners. And fair enough too – most of them have given their of blood, sweat and many years to build their business and for many it is a part of who they are. Our business gives us a sense of identity, a purpose for being and is an integral part of our lives, so why would anyone give it up?
The simple answer is: to maximise their wealth. Do you realise that your business is likely to be one of your most valuable assets and is likely to form a large part of your retirement funding? Fact is, you can’t afford to get your exit wrong.
So planning your eventual exit may not be urgent but it sure is important. Here are some thought starters on the things you should consider in preparing your ultimate business exit:
1. You have a range of options
This means that you don’t in fact have to actually leave your business to successfully exit. Get to know the various ways you have available to maximise the value of your business and extract your wealth. If you’re not sure what the best way is to step away from your business check out the free insights paper on understanding and evaluating equity transfer options at https://ascendpartners.com.au/resource-center/
2. When is the best time to exit?
There are three different factors that need to be considered when determining the time to exit your business:
1. Macroeconomic environment
Positive underlying trends, such as a strong growth cycle related to your company’s industry often correlate with heightened levels of acquisition activity and high purchase prices. When there is an abundance of capital from strategic buyers, financial investors and lenders competing for deals, the market becomes very liquid, which fuels transaction activity and higher valuations. It pays for you to know the bigger economic picture and how that can directly impact your industry and own circumstances.
2. Business performance and outlook
The best time to sell a business is when you have no need to do so, when the company has demonstrated solid performance and the future looks promising. Buyers are attracted to a successful track record. Further, buyers are attracted to the perceived future upside. You should not be overly concerned about leaving this future growth for the buyer because you will be compensated through the premium paid. The ability to credibly demonstrate a successful and historical track record of earnings along with bright future prospects will generate the most interest from buyers. More interest from buyers often leads to competitive bidding, thereby providing the leverage needed to achieve the highest price.
3. Personal needs and desires
Often the biggest challenge for business owners is to know when is the right time to step away. An effective succession plan will start with developing an understanding of your personal goals, and then determining how your business will help you achieve that outcome.
3. How long will it take to sell your business?
Many business owners don’t realise that you may need to commit a year or more to the sale process. If so you are much more likely to get a better price when the business is eventually divested. If you are ready to make the sale but your business is not, you need to take the time to assess the situation and determine what needs to be done to make your business saleable and how long the process will take. But you need to understand that the more changes and revamping your business needs, the longer it will take to get the transactions done.
You can complete your own free preliminary assessments on how attractive your business is for sale at https://ascendpartners.com.au/exit-readiness-calculator/.
Time to REFIRE
Most business owners do a great job establishing and building their businesses but are disappointed when it comes time to reaping the rewards. It is unfortunate that many of these business owners who spend years building their businesses will receive only a fraction of what the business is actually worth. Or, if ownership is transferred to a family member, the
y could see the legacy destroyed through lack of preparation and planning. Our book titled Seven Steps to REFIRE will help educate you on how to prepare your business for a successful transition as well as helping you to address critical personal goals and business factors that should be tied into the process. You can buy the book at: https://ascendpartners.com.au/product/book-7-steps-refire/
Who are Ascend Partners?
We are experts in helping business owners build their business and supporting them to get ready to sell, exit or transition their business.
Our commitment to you is to create a plan that will give you the best possible chance of achieving your business, personal and financial goals. Using our systematic approach we work with business owners to increase the value of your business and improve your profit, which allows you to exit your business and move on to the next phase of your life with confidence and certainty.
Contact us for a free consultation: https://ascendpartners.com.au/contact/