Exit planning is about creating future options, not simply preparing to sell 

We all know that the best results usually come from having a well-designed and executed plan. If your eventual exit from your business is important to you, your future and that of your family, you will want a good outcome. That means having a plan. 

All too often, the two things – outcome and plan – do not seem to get connected. For various reasons, many business owners put off planning their exit and then decide they want to get out. At that point, there is often far less opportunity to influence the outcome. For some, this can be a serious and worrying development when the value of the business does not meet their aspirations or, worse still, leaves their future and that of their family in an uncertain position. 

So why does exit planning get relegated to an afterthought? 

Why business owners delay exit planning 

Over the years, we have heard many reasons from business owners: 

• Your business is going well, so selling it for a good price at some point in the future will not be a problem. 

• You never set out to build a business to sell. It has provided a good income, so when you eventually step back you have no expectation of generating a significant capital return. 

• An exit plan sounds final and you do not want to contemplate the time when you no longer own and run your business. 

• Developing an exit plan feels like another task to add to an already demanding role. 

• It is not clear what an exit plan involves or why it would add value. 

These reasons are understandable, but they can prevent owners from recognising one of the most important realities of exit planning: waiting until you are ready to leave often means many of the opportunities to improve value, increase flexibility and create options have already passed. 

Begin with the end in mind 

When is the best time to start your exit planning? When you are ready to sell or retire is often too late. 

A useful way to think about exit planning is to begin with the end in mind. Having a clear understanding of where you want to end up helps you make better decisions today and ensures your business develops in a way that supports your long-term objectives. 

At the point of setting up your business, launching to the market, moving through the pre-revenue stage and winning your first customers, the last thing on your mind may be your exit. Some business owners are very clear about their destination and set out with the intention of building a business to sell. Others focus entirely on growth and performance without considering where the journey may ultimately lead. 

The two primary reasons for planning your exit from the beginning are to establish a clear destination towards which you can direct your business and to put in place good practices, processes and behaviours that will be advantageous when you eventually step back. 

Good exit planning is not simply about creating a future transaction. It often improves business planning in the present by providing greater clarity around long-term objectives and helping ensure decisions are aligned with those goals. 

The hidden risks of owner dependency 

One of the most valuable outcomes of early exit planning is reducing dependency on the owner. 

If you are contemplating an exit and any of the following examples apply, you should consider how your role evolves and what support you may need to make the necessary changes: 

• Major clients only want to deal with you. 

• You are fundamental to every proposal and sales pitch. 

• No one can determine prices without your involvement. 

• Every recruitment decision is made by you. 

• You are the source of all new products, services, and process improvements. 

In short, if you and the business are synonymous and the business cannot function effectively without you, your exit may be more challenging than you anticipate. 

Furthermore, your team may be inhibited and reserved in applying their full capabilities to the benefit of the business. That does not help the business today, and it certainly will not help when the time comes to step back. 

The more embedded these behaviours become within the company culture, the more difficult they can be to change. Beginning with the end in mind and accessing the wide range of support available to you can help you run your business in a better, more developed way, creating benefits both now and in the future. 

Creating options for the future 

The earlier you start planning, the more options become available. 

Reducing owner dependency, developing your management team and strengthening the business are not simply exercises to make the company more attractive to a future buyer. They also create flexibility for you as the owner. 

Exit planning is about creating choices for the future. 

You may ultimately decide to sell the business, pursue a management buy-out, transition ownership through an employee ownership trust, pass the business to family members or simply step back from day-to-day involvement while retaining ownership. The more prepared the business is, the greater the range of options available to you. 

By starting early, you give yourself the time and flexibility to shape the future on your terms rather than reacting to circumstances when an exit becomes necessary. 

Bringing it all together 

The most successful business exits rarely happen by accident. They are usually the result of years of planning, preparation and deliberate decision-making. 

Perhaps most importantly, exit planning gives you greater control. Rather than reacting to circumstances when the time comes to step back, you can shape the future of both the business and your own journey. 

If you are two to five years from your next phase or simply want clarity on the options that may be available to you, get in touch to start a conversation.