Exit plans for business owners are so important because they allow you to prepare for every eventuality when the time comes to leave your business.
However, a recent survey conducted by Capital on Tap has found that 79 per cent of small businesses have not put an exit plan in place.
It’s an interesting figure because many will be solely focused on driving their business forward and an exit plan may have crossed their mind, but they haven’t put any measures in place.
What did the survey highlight?
As well as highlighting the percentage of small business owners who don’t have an exit plan, the survey also spotlighted factors behind this.
Having started their business from the ground up, understandably, they feel a strong affiliation with their company and over a third said they cannot imagine losing their business.
In addition to this, many cited the current market and the struggles of finding a buyer. It can be tricky finding the right buyer even if there are interested parties because buying a business is a commitment that many decide isn’t right for them.
Others also highlighted the legal challenges and complexities involved in selling a business.
The importance of having an exit plan in place
Exit plans are valuable for preparation because you can prepare for every scenario, whether it’s selling to an interested party, merging with another company or passing your company down to the next generation.
A plan allows you to build up its value and eventually reap the rewards when you do exit the business, because your return should be stronger.
However, you also need to factor in the realities of life because things can change very quickly, which may leave you in a position where running your business becomes difficult or even impossible.
An exit plan at least allows you to incorporate those factors. You don’t want to hang on for too long to a point where your personal circumstances force you to leave your business.
What type of exit strategy can I put in place?
Exit plans are essential for all businesses, and it’s important that you put a plan in place for when the time comes to leave.
You need to seriously think about what is best for both you and your business when putting an exit plan in place and there are several strategies to consider.
One option is a merger and acquisition where your business is acquired by another and eventually merged together, but acquisitions will depend on whether interested parties are keen to find a deal with you to take the business off your hands.
You need to prepare effectively if you do choose to sell your business because buyers need to have a clear picture of how the business operates, the plans to grow in the future and how stable your business is financially.
You may also consider a management buy-in or buy-out or an Employee Ownership Trust (EOT), which allows you to sell your company shares to your employees.
Succession planning is also a good exit strategy. This is where you pass the company down to members of your family however, this is only a serious option if your family is interested in taking over the company.
The exit plan you decide needs to be effective and suit all parties. Striking the best deal that meets your requirements and accounts for the tax implications.
With nearly eight in ten small business owners not having an exit plan in place, it is essential that you don’t neglect an important task you need to complete, even if your exit isn’t for several years.
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