We were recently involved in a heart-breaking case where after 30 years of doing business a company went bust within 6 months of the owner exiting. Now there are many reasons why businesses fail, but in this case, the primary reason was a lack of planning for succession. This owner put 30 years of his heart and soul into his company, eventually reaching new heights with impressive expansion and growth. However, he failed to plan his exit.
Life happens, and like everybody else, owners get old, sick, have accidents or simply decide that they want early retirement. But just because you’ve had enough, doesn’t necessarily mean than the business is ready to throw in the towel. Therefore it’s so important to have an exit strategy, that way you would be securing the succession of the business when you’re not there. I’ll take you through some basic guidelines in developing an exit strategy for you and your business.
Procrastination
Let’s face it, you know you have to do this: your accountants, friends, family and lawyers have spoken to you about it, but you’re too busy, you’ll look at it next year, now is not a good time, the business needs to be doing better before I start. Whatever the excuse you use to rationalise your procrastination, bear in mind that it’s just that: an excuse. You do not want to face the future, it’s scary or you’ve convinced yourself that no one can replace you. Fact of the matter is that if you want some sort of freedom down the line, it is never too soon to start planning your exit. So just do it.
Developing a team
This is not a decision that should be taken lightly, as a result, consult with a professional accountant who’s better suited to make recommendations and goals based on the individual characteristics of your business.
Set a timeframe
The transition doesn’t need to take place overnight, but you should set the time frame, whether it’s over a year, five years, 10 years or more. This way you’ll be able to structure your business’s goals and financial plans in line with your exit strategy.
Benefitting from your business
You’ll need to decide what you want to do with the business when you exit. Do you plan to sell? Do you want to receive a tidy retirement income by retaining the assets of the business? Or get paid dividends as a shareholder? Whatever, you decide, these changes take time to implement, so you’ll need the help of an accountant and lawyer to set these changes in motion.
[If you plan to sell your business, please bare in mind that businesses that are solely operated by the owner sell for far less than businesses that are independently run by management. Why? The assumption when the owner is also the manager, is that when the owner leaves, the clients’ will leave with him/her, thus losing revenue. As a result, the value of the business upon sale is greatly reduced.]
Decide & Train
Who do you want to replace you? Be it a family succession, management team or hiring of key staff, you will need to take the time to train and aid them in key skill development so that they are able to do your job as well as you do. The issue here is learning to delegate – you will need to learn to let some things go. This is a difficult step, and it often helps to have an independent party (especially in the case of family members) who can remain objective and impartial when it comes to the successor’s development.
Planning for your future and the future of your business is crucial. Don’t leave your hard work to chance. At Bremner Advisory, we specialize in helping business owners develop effective exit strategies tailored to their unique needs. Secure the legacy of your business today—visit us at Bremner Advisory to learn more or schedule a consultation with our expert team.