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How to exit your business and tips for succession planning print Print

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Every business owner dreams of successfully exiting their business. The right people have bought it, or have taken it over, and a great sale price was achieved. Whether you’re planning to sell your business or pass it on to family, we’ve got some tips on how to successfully financially exit your business.

Exit your business & tips for succession planning

Planning is key

It’s important to always have your business in good shape to sell, rather than waiting until you actually want to leave. You never know when an unexpected offer might pop up, or something may happen to you to prevent you continuing. Either way, having all your ducks in a row is essential.

Some critical factors to consider when planning your exit before you tell anyone are:

  • Deciding when to leave – have this worked out well in advance, and take into consideration things like family, finances, your health and the state of your industry. Some people spend up to 5 years planning to leave.
  • Preparation – forecast your expected net profit over the coming year so you can determine how healthy your business is. Then you can take steps to improve it, so it becomes more attractive to potential buyers. Download the ANZ Profit Forecast template to help make a start. 
  • Document processes – write everything down so that the new owner can run your business without you. Create manuals that outline all your operating processes.
  • Increase customer loyalty – you want to be able to reassure buyers that customers will stay. Focus on improving your customer experience so they keep coming back.
  • Talk to experts – make sure you’ve got your accountant, insurance agent and lawyer fully involved in the process, because there’s always a lot to consider in terms of paperwork and legalities. It’s not a bad idea to invest in a business broker.
  • Checklists – make sure you’ve documented all the tasks that need to be completed, and get the above experts to look over them to make sure nothing’s been missed.

You will probably not want everyone to know you are exiting, but when you are ready:

  • Talk to your suppliers – they need to be in the loop so they will continue to supply any new owner. Try to introduce the new owners to them if possible.
  • Talk to your staff – they should also be kept informed. And making sure your staff are working efficiently increases your attractiveness to potential buyers.

Succession planning

Succession planning is a sub set of exiting, where you have a person (or people) who will succeed you, often family members, or an employee.

It’s important to decide if you’re going to have no involvement in the business on-going, or if you are going to remain on board in a part-time capacity as a guiding hand for a period of time.

Remember the rules about buying and selling, and especially valuing the business still apply.

Choosing and grooming your successor

Most succession plans involve family or selected staff. And it’s really important that you do everything you can to prepare them for their new role.

  • Passing to family – often this can be difficult because it’s a lot more personal. It’s important to be sure that they have a genuine desire to run the business, the necessary skills and aptitude, and are willing to be in it for the long haul.
  • Passing to employees – whether it’s a high-performing manager, a group of employees or a set of shareholders, it’s important that everyone is aware early on of your intentions. 

There are four essential steps you need to take to prepare successors:

  • Let them watch you work. They need to learn as much as they can. Continually explain why you do things a certain way and how you make decisions.
  • Dip their toes in by letting them make some decisions, with your guidance. Work together on key projects. Encourage them and provide them with feedback.
  • As they gain in confidence and ability, give them more decisions to make, with you as an adviser rather than guiding them. Let them make mistakes and show them how to fix them. It’s the only way they’ll learn to deal with failure.
  • Give them total control. Encourage and empower them so that they are truly ready to run the business without you. This is one of the greatest challenges for most business owners.

Transferring assets and control

  • Transferring assets – get the business valued by an expert, so you can plan how to be paid for the business. If the line between personal and business assets is blurred, this is the time to sort it out. 
  • Transferring control – put together a transition team who’ll help you transfer control. They should be people who are not emotionally involved, like your accountant, lawyer, or business broker. Maintain open communication with your team and your successors. 

When all is said and done, successfully exiting your business comes down to planning. The sooner you put your plans in place, the more successful it’s going to be. And at the end (unless you’re staying on in some capacity), you need to do the hardest part of all – walk away. Once the new owner has taken control, all decisions are theirs. Once you’ve let go – let go!

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