You may think an exit plan is all about selling your business. Not so; you can achieve a successful exit without a sale. That may seem a contradiction in terms, but your exit doesn’t mean you have to give up your ownership.
As you contemplate your and your business’s next phase you have two important decisions:
- what to do about your ownership/shareholding
- what to do about the time you invest in the business.
Time and money are the two primary assets you are considering with exit planning.
The most frequent response we get to asking a business owner about their exit plan is, “I’m not ready to sell yet”. However, when we ask about plans to spend less time in the business, delegate more and reduce the dependency on them the response is far more positive – at least in intent if not in the form of a meaningful plan.
Good exit planning fully addresses how you reduce your time commitment to the business whilst making the business stronger and more attractive to a future investor or buyer.
There are various scenarios where ‘getting your time back’ is the initial priority in an exit strategy – and may be the only focus of that strategy:
- You’re putting too much of yourself into the business and it is having a detrimental effect on you, possibly on your family and almost certainly on the business. Maintaining a high time and effort input is tough and doesn’t necessarily equate to long term success.
- You’re having a problem attracting and retaining great people. They may love the business but the reality for them is a sense that their contribution isn’t enough, they may not feel trusted and don’t develop to their (or your) potential. In short you are blocking their development and in so doing you inhibit business growth and reinforce the dependency of the business on you.
- You have the opportunities to grow but struggle to meet the demand and your own standards for client service. This may be another symptom of overdependence where you have kept hold of key processes or decisions, for example pricing and proposals or key client relationships, the result being you have capped your business’s capacity to grow.
- Taking time away from the business is problematic, in particular you may lack confidence that everything will go to plan while you are away. This applies equally to planned time out, a holiday for example, and unplanned or enforced absence, perhaps due to illness.
In each of these scenarios a plan to reduce your time commitment to the business can release greater growth potential, help build a stronger team and potentially re-energise you. An exit plan focussed on ‘time’ can result in a better, more profitable business that is a pleasure to own.
Furthermore, at the point where you start to consider ‘ownership transition’ i.e. the part of an exit plan that focusses on money, you are in a far better place both business-wise and personally to take the next step. This applies whether you are considering a full sale, attracting an investor to take on part of your shareholding or an internal transfer of ownership, for example through a management buy-out or employee ownership trust – because your team will have benefited from your reduced time commitment.
There is no time like the present to plan for a better more enjoyable period of business ownership. A plan to get back some of your time separately from a plan to reduce your ownership is a very attractive and practical approach to your exit strategy.
Curious to find out more? Contact Henchards.
(Photo by Camille Brodard on Unsplash)