When we all set out on our business journey, very few of us start by thinking about how we are going to eventually exit. During the early years the focus is on getting that first sale, then growing the business so that it provides a reasonable financial reward without being too much of a burden on us physically and mentally.
Many of us would simply wish to retire and hand over to the kids, others would like to sell the business for a high value and use the nest egg for a comfortable retirement. Whatever your plans, you have to ensure that when you leave, the business is able to continue operating without you around. There is a saying that if your business can’t run if you aren’t there, then you don’t have a business, you have a job.
Here are some things to think about when thinking about how you will exit your business. If you don’t have these in place, now is the time to start:
Systems and Processes
In order to have grown your business into an asset that can be passed on, you will have needed to introduce systems and processes that your staff can follow so that you haven’t needed to be watching over their shoulder at every turn. This should have been undertaken in your business long before you were making plans to sell in order for you to be able to take time off and know that the business will keep running smoothly. If not, you not only need to get these in place, you probably need a holiday before you are too sick to enjoy one.
You want the business to be running as efficiently and effectively, and therefore profitably, as possible. Not only will this make the business look more attractive to a prospective buyer, it will also maximise the price you can expect for the sale. Your ego may be telling you that you are the vital cog in the machine that makes it all run smoothly but if a stranger can’t just walk in and operate the business without you there, then you aren’t ready to sell.
This can take a number of years to get set up so get started now.
A saying I like is “If you don’t write it down, it never happened”. The last thing you want is for a new owner to keep calling you while you are on a tropical beach to ask you about every little nuance in the business that is locked away in your head. Make notes of the little things that may help the new owner. Is there a customer that tries to get away with paying on time if you let him? Is there a supplier that will get you out of a bind at short notice if you need materials?
These little things can make the difference between the after-sale period being smooth sailing or rough waters.
Have a chat with your accountant early in the sales process in order to ensure that you grasp the tax implications of how you will deal with the sale proceeds. The earlier you put tax strategies in place the better to ensure that you don’t have to pay more tax than you have to. No accountant worth their salt would suggest tax avoidance but they can work with you to ensure that the tax you pay is fair.