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What’s the point of an exit plan if you aren’t ready to sell?

You head to the exit when the performance is over. There is a sense of finality, a transition from one state to another, perhaps a feeling that there is nothing more to see or do.

If you have more to achieve in your business the thought of an Exit Plan may feel premature. You might question the value of spending time and diverting your energy when you have no intention of contemplating ‘the end’.

While some business owners have their future clearly mapped out many others haven’t the time or don’t see the necessity of developing an Exit Plan. When we talk to owners about their ‘exit’ the most frequent response is that managing the day-to-day business is the priority.

At any stage in your company’s evolution you are making two finite and precious investments, those of your time and your money. At some point you will want a return on your investment and take out of the business money to build your wealth and time to spend on other important things in your life.

We encourage business owners to look at exit planning as a way to give you control so that as different situations arise you are prepared and can get the best outcome. An Exit Plan is essential to the successful extraction of your time and money.

Here are five situations where you will value the benefits of a well-constructed Exit Plan:

  1. You want to reduce the time you spend in the business without selling up. In essence you want to ‘cash in’ some of your time investment and make a partial exit from the day-to-day running of the business.
  2. A potential buyer makes an unexpected offer for your business. This can happen at any time and without warning. How well prepared are you to handle the approach and secure the best outcome, be that a sale or otherwise?Related: How to manage an unexpected approach to buy your business
  3. You aspire to establish a new venture. If you have been successful in starting, building and running your business you may want to do it again. To do so may require you get all or some of your time and money released to invest in the new enterprise.
  4. You are forced through circumstance to take time away from the business. No one wants to contemplate being forced out of their own business but if long term illness or incapacity should strike will you want the option of retaining your ownership whilst exiting your time? A strong management team and business continuity plan will give you that flexibility either permanently or until you are ready to return.Related: Is there a gap in your management team?
  5. A new market or opportunity arises and you want to sell part of the company to raise the necessary finance. A typical growth strategy involves expanding the product range or moving into new markets. There are many options for financing a growth strategy and attracting an investor is one to consider.

Related: Growth strategy – always keeping a clear end goal firmly in sight

These five situations have one thing in common, they are not the classic ‘sell up and retire’ scenario that typifies most exit planning. An Exit Plan will certainly cover this eventuality but we see it as too limited a perspective.

We take this view for the simple reason that an Exit Plan can be much more valuable and flexible as a business planning tool. In some regards it might better be called a Business Attractiveness Plan.

By developing your business as if you are aiming to attract a potential buyer you end up running a more efficient and profitable company. One of the biggest issues to tackle is the dependency of the business on the owner him/herself. If key activities, relationships and knowledge lay with the owner the company usually will be less attractive to a buyer and therefore be worth less. By the same token this dependency also inhibits other business growth strategies for the company and personal aspirations of the owner.

Exit planning is about two precious things: giving you the option to reduce your time in the business so you can focus on other activities; and securing a sale valuation that allows you to embark on your next venture, be that business or personal.

An exit isn’t simply the way out at the end of the performance – it can be a doorway to greater flexibility and exciting new opportunities.

We work with owners who want control over the time they spend in their business and flexibility around when and how they extract their wealth. For more details, call us on 01276 858199 or contact us online.

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