Exit planning for business owners

For every business owner, there comes a time when you need to consider how you are going to exit the business. However, many fail to plan ahead for it. In the UBS Investor Watch 2018 report, it was highlighted that 48% of business owners do not have an exit strategy in place.

In this article, we will highlight the importance of exit planning for business owners and what drives the need for exit planning.

What is Exit Planning?

Exit planning is the process of preparing a business owner to exit the business and ensuring you get the maximum value for your investment. For that, you need to clearly define your objectives; a combination of personal and business related objectives. These objectives define the exit plan that helps you realise the value in your business.

Essentially, the exit planning process enables you to prepare yourself and your business for your inevitable exit. It minimises uncertainty and mitigates potential risks that may arise if you have to make a swift exit from your business.

The importance of Exit Planning for business owners

It can be very easy for a business owner to get caught up with the day-to-day activities and not plan for the exit. This may be because you either don’t know how to prepare for your exit, or you think that your exit is so far in the future that you don’t need to plan for it right now. As a result, you are not prepared for the eventualities that may occur. The scary question for most business owners is what would happen to your business if you were to fall ill? Have you taken the necessary steps to prepare your business for that? Alternatively, what would happen if you were to receive an offer for the purchase of your business? Would you get the true value of what you have created or is there a risk you could be underselling your business?

The truth of the matter is that you can’t predict what will happen in the future. For this reason, it is important to have a robust exit plan in place for when the time comes for you to exit the business. By doing that, you can identify where you want your business to get to and a pathway for you to get there. The implementation may take time, but you will be making informed strategic decisions aligned to your objectives to maximise the value of your business.

What drives the need for Exit Planning?

There are various drivers that could influence you to consider exit planning. That’s why it is important to have a robust process in place to ensure that you are prepared for all circumstances.

Some of the most common drivers of exit planning for business owners are:

  1. Retirement
  2. Health issues
  3. Family problems
  4. An unexpected job offer
  5. Offer to purchase your business

Although many of these circumstances may be a long way off from where you are now, you still need to be prepared for them. There are 5 different exit strategies for business owners that we will discuss in our next article. In our third article of this series, we will discuss the four critical success factors of exit planning.