Four critical success factors of exit planning

In the previous article, we discussed the five different exit planning strategies for business owners. Irrespective of the exit planning strategy you choose, you will need to focus on the four critical success factors of exit planning to ensure you get maximum value for your business and make a smooth exit.

1. Value your Business

You need to know the value of your business. You may need to involve external experts to help you understand your business value. This step is essential within the exit planning process as it allows you to benchmark your current business value. As a result, you begin to identify the plans you will need to put in place to reach your target value before you exit the business.

2. Optimise the levers of value creation

In order to influence the future value of your business you need to manage the six levers business value creation. The starting point of this process is to benchmark what level your business is at in each of these business-critical areas. To get an accurate assessment it is advisable to engage specialists to provide an objective and unbiased view. The benchmarking process enables you to identify how the business can increase its value and establish business improvement programmes that will maximise the future value of your business before you exit.

3. Create a strong management team

You need to create a strong management team underpinned by good governance and management processes. This will reduce the over-dependence on you as a business owner, and mitigate any risks that may arise if there is a sudden change in circumstances.

4. Develop a team to execute the plan 

“A great plan is only as good as its execution”. It is essential that you have the resources to execute the plan whether this involves internal teams or getting external support to accelerate the process. This should focus on driving revenue growth and delivering operational effectiveness in the business.

When do you need to start Exit Planning?

Some would suggest that you need to begin your exit planning at the beginning of your entrepreneurial journey. From our perspective, this is highly unlikely. At the inception of your business, you’re thinking about building it and creating value, not about when you are going to exit it. In our view, you would begin to prepare for your exit when one of the key triggers of exit planning come into play. We advise you not to rush the process as this could increase the risk of a poorly executed exit plan. You need to allow yourself 2-3 years in order to successfully implement the process and exit the business. This will enable you to have a much smoother transition and get the maximum value for it. If you aren’t at that point yet, it is still important to consider a contingency plan for the business.

Getting your exit planning right is very important. It affects you personally and ultimately the legacy of the business. It determines the value you get for the business you created. We can help you to achieve your exit goals and maximise the value of your business. Contact us to discuss it further.