Negotiating change: how to plan the right business exit strategy

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It is astonishing how many directors and shareholders do not have an exit strategy. The company becomes their life and they fail to consider what will happen when they eventually want to retire, or if they unfortunately become sick.

An exit strategy is a vital requirement for any investor and should be considered from the outset. It may be a three, five or even 35 year plan, but it is something that needs to be considered.

There is no point waiting until you want to retire only to find out that your business is unsellable for the simple reason that you have “become the business” and can’t easily extract yourself from it.

Take the right steps:

  1. Get the full value of your business

It’s absolutely crucial you have a business valuation that establishes a fair value for your business. Putting a dollar value on a business takes time — you will need to have a specialist who can look at your assets and liabilities with an objective eye.

2. Prepare supporting materials

Savvy buyers will certainly research your business’s financial and operational history. So be armed and ready — have accurate figures and supporting materials ready to help you negotiate the price you’re looking for.

3. Delegate authority

Make sure you have the right people in place and start delegating authority. Your business needs to be portable so anybody can buy in and continue to make money from it. It needs to be able to continue working for you and making money even when you are not there. That way, you can take a holiday without worrying or, if you become sick, it will carry on operating.

Make sure that, when the time comes, you can easily back out knowing the company will be able to continue without you. By doing so, you will increase the saleability of the company and maximise your potential future recovery for its sale.

Need advice in developing an exit strategy? Are you considering selling your company? Take the right steps and contact us to help you through the process.

Article orginially published by Gerry Rea Partners -Expert insolvency practitioners and qualified accountants - www.gerryrea.co.nz