Running a business is full-on; there’s always something to fix, chase, or figure out. So planning how to leave it all behind might feel like a job for the “future you.”
Trouble is, that version of you will wish you’d started sooner…
A successful business exit plan takes years to build, not weeks. So if you want to walk away smoothly, profitably, and without a tax nightmare, now’s the time to start thinking about it.
Here are eight steps to creating a solid business exit plan.
Step 1: Get clear on your end goal
Before you even look at sale options or valuations, ask yourself: “What do I actually want?”
- Do you want to cash out at the highest price?
- Keep the business in the family?
- Hand it to your team?
- Walk away clean?
Why do you need to know this? Because your reason for leaving should shape your business exit plan. For example, if you’re after legacy, your route will look very different from someone eyeing a fast sale.
Step 2: Choose your ideal exit route
There’s more than one way to leave a business. For example, you could:
- Sell to a third party, like a competitor or investor
- Let your management team take over through a buyout
- Hand the reins to your employees through an Employee Ownership Trust
- Wind the business down and extract the value
As you can imagine, each option has its own pros, cons, timelines, and tax angles, so your business exit plan should make clear which path you’re taking and what needs to happen to make it work.
| Need help deciding which exit plan is best for you? And what the tax implications are? Get in touch with us at [email protected] and we’ll break it down for you. |
Step 3: Strengthen your team and name a successor
One of the biggest red flags for buyers is a business that falls apart when the owner leaves. Sound familiar? This means that if you’re at the centre of every decision, you will need to start transitioning yourself out of the day-to-day now.
To do this, you will need to focus on:
- Clarifying roles,
- Building up your management team, and;
- Creating space for others to lead.
If someone specific is taking over, train them early. Waiting until six months before you leave is a recipe for stress (and a drop in value).
Step 4: Streamline operations and tidy up loose ends
A buyer, or successor, will want a business that runs efficiently. This means now is the time to tackle any clunky systems, unresolved disputes, dodgy contracts, or inconsistent processes.
Start by:
- Simplifying where you can (automation is your friend!),
- Getting everything documented (so that your processes don’t depend on people), and;
- Fixing what’s not working as well as it should.
A smooth business is easier to sell and more valuable on paper.
Step 5: Sort out your finances and avoid panic-cleaning
This one’s big (and not just because we’re numbers people). When planning your business exit, you absolutely need to make sure that your financials are in order. We’re talking:
- Clean books, ideally following GAAP
- Strong records for the past few years
- Clear evidence of profitability and growth potential
Oh, and avoid cutting so many costs before a sale that the business looks starved. Buyers want a solid foundation, not something propped up by short-term savings.
| Need help? Talk to an expert at [email protected] – and we’ll sort your finances for you. |
Step 6: Think about tax strategy in advance
Tax planning needs to happen early, not at the point of sale. Why? Because the structure of your business, how the deal is set up, and even your location can impact your tax bill.
A good accountant will help you minimise what you owe, but only if they’ve got time to plan properly. So make sure to involve them in the discussions and planning early!
Step 7: Know your value and what makes you special
What makes your business worth buying? Is it your team? Your contracts? Your tech? Your client list? Be honest and be specific, and make sure your value is highlighted in your pitch.
A good business exit plan should include a clear story about why your business is a smart buy, as this can then be used to drive your asking price.
Step 8: Do your own due diligence
Buyers will look through everything, so beat them to it! Gather up all key documents for your business exit plan, including:
- Contracts, permits, insurance, and employee records.
- Financials, leases, supplier terms, and asset lists etc.
And get organised early! You’ll look more credible, and the deal is less likely to get delayed or fall through if you have everything to hand.
Plan for the best!
If you want to leave your business on your terms, a proper business exit plan is essential. You can’t wing it and hope for the best, not if you care about your people, your profit, or your peace of mind. You have to plan for it.
| Need help creating an exit plan that works for you? Get in touch with us at [email protected] to talk about where you are now and where you want to end up. |
