You put in place an exit plan because you want to sell your business – hopefully for an attractive price that sets you up for what you want to do next in life. At least, that’s one scenario. If that is your objective then a good exit plan will help you prepare the business for sale, identify ways to find buyers and ensure the business is in the best shape possible for a successful outcome.
However, what if you are not interested in selling but do want to step-back – is an exit plan still relevant?
An exit plan is multi-dimensional and has tremendous flexibility to cover a wide range of scenarios and outcomes for a business owner. It certainly includes the traditional ‘sell up and retire’ scenario that is perhaps the most frequently thought of use for an exit plan, but also many others.
Here are a range of different purposes for an exit plan:
- You are ready to reduce your time spent at the heart of the business and reduce the dependency on you for key activities such as business development, creating new products or services, or client relationships, but remain the overall, active business leader.
- You‘ve reached the point where you want to pass on the leadership of the business (not just operational responsibility) including strategic planning to someone else and fully step-back, but retain ownership.
- The business is need of additional investment and you are prepared to sell part of your shareholding. This is a ‘partial exit’ and the requirements for attracting the right investor and preparing for having someone else involved in the ownership of the business are all part of a good exit plan.
- Similar to attracting investment principally for money, you might also want to bring a new shareholder into the business for their experience, expertise and skills.
- You want to pass on the ownership of your business to your management team – this might be a partial transfer or a full management buyout (MBO); it might be funded by the management team itself, a third party or by you as the vendor, and it may be executed over a pre-determined transition period.
- You might also want to transfer ownership to your full employee group. An employee ownership trust (EOT) may be something that appeals to you both as a principle but also be a very effective structure to take the business to the next level as you scale back both your involvement and your ownership.
The common principle across all these scenarios is to distinguish between you as an owner-manager who wants to reduce your time commitment and a shareholder who is looking to sell some or all of their ownership. To achieve any combination of these scenarios the consistent themes are developing a team to take on your responsibilities, making your business attractive to future investors or buyers and ensuring the business is valuable enough to yield the money you want – all key components of an effective exit plan.
To discuss your specific requirements, and to see how an exit plan can deliver the future you want, talk to Henchards.