How to Exit your Business – all the Prep

Want to Exit your Business?

8 steps to Maximise your Value and Minimise your Stress

 
We all have those days, the ones when we simply wish the world would swallow-up every lock, stock and barrel in the place and in the same moment tele-port us to Tahiti, complete with endless cocktails…. (well maybe that is just my version?). Anyway, GETTING OUT is not usually as simple as that, but it can be profitable and stress free if you do the right preparation.

Which Exit Method???

Selling isn’t the only business exit option, there are other strategies that may be more applicable, so start by deciding the “How” of your exit:

* Step Away – declaring bankruptcy, and/or being placed in Voluntary Administration, involve immediately replacing both control and management
* Close it up – “shutting up shop” and walking away
* Give it Away – transferring the ownership of your going concern to family or staff member for no return
* Sell – undertaking a commercial transaction to transfer ownership

In deciding which strategy is best for you these two factors will be critical:

A. Value your Business
If your business has a negative current value, or is insolvent then the first choice, handing over to the administrators, is your only one.
If, on the other hand, the value is zero then closing-up or giving it away are your options – when you have “nothing”to sell there is no possibility of a sale.
This step is good for getting an understanding of how others will unemotionally perceive your business.

[box type=”note” style=”rounded” border=”full” icon=”empty”] What is your Business Really Worth?
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B. Identify Potential New Owners
No sale can happen without a buyer: – selling isn’t just about price, but also about the market. Each potential buyer will be looking for different things, such as future cash flow streams, growth potential, return on investment or synergies; knowing these key factors will allow you to prepare appropriately.

Once you know which exit door is to be used then take the next steps accordingly.

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Prepare to Exit your Business – in 8 steps

Like many big leaps, success is primarily in the preparation. The more prepared the business is prior to the commencement of the sale process, the smoother and usually more successful the subsequent process will be – the following points apply to all situations other than Stepping Away*:

  1. Get your Books in Order – make sure all your tax returns are up to date, and your business reports clearly differentiate between “necessary” business expenses and those that have occurred at your discretion. This is probably the most important step in establishing a strong selling price, but is necessary in other circumstances.
    e.g. a new business owner may not want, or need, to travel to Italy annually even thought this was part of your expenses; as this will impact how a new owner will calculate profitability it is important to identify it as optional.
  2. Work out if there is anything you want to keep – that stuffed moose head in reception that you won at a convention will be part of the Business Assets and therefore part of the sale. Review the things you do not wish to sell and itemise them as excluded. There is a caution here, do not remove assets if you are considering liquidation – untimely removal may be considered theft!
  3. Get your systems and processes in order – if the business relies on you and only you then it will not be sale-able. Every new owner will want to see “how we do it here” so they can keep or improve on things accordingly – the more work you do here the broader your market becomes because a good manual will enable people outside your industry to succeed and will improve your sale value.
  4. Get your Staff in Order – for the same reasons as above, your business needs to run without you and so preparing your staff for change is vital. Ensuring you create continuity after sale and retain “business deep smarts” for the new owner will improve your sale value. Remember too that if you are considering closing, you need to give employees appropriate notice and may also need to provide termination payments.
  5. Understand the best tax structures – this is complex, so get good advice and do lots of research to ensure the best fit exit and tax strategies – both sides of the coin are important here – you don’t want to pay the tax-man too much, but shorting your tax bill will land you in hot water.
  6. Give your premises a “spring clean” – just like selling a house, a bit of a spruce-up goes a long way to improving appeal. If you have had a gut-full and “just want out” it may be worth paying a handyman to apply a lick of paint or consider hiring a commercial cleaning team for a day.
  7. Create a “Brochure” – a booklet describing the business for buyers to determine whether they are interested or not in pursuing a purchase. Don’t give away all your trade secrets, interested buyers can ask for more detailed information – your broker will help you with this, or there are plenty of templates on the internet – e.g.
  8. Choose your team – we recommend you at least use a lawyer to draft all your contracts including a Heads of Agreement, p;us if you are selling there is also the choice of using a business broker or not. Decide early as these decisions will impact the amount of work you need to do yourself.
  9. *If Bankruptcy and Administration are your only option then the new management will handle all of these factors and undertaking any of these steps may land you in legal trouble.

Most people spends years plotting and planning the start of their business venture, yet getting out is often a “spur of the moment – I’m sick of it all” decision. Taking the time to get really prepared can add tens of thousands of dollars to your end result.

 

Exiting your Business can be a good experience, as long as you are well prepared!

 

 

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About the Author

Eve Blackall Smart Accounting image

Eve Blackall the small business answer to The Supernanny.

At Smart Accounting you work one-on-one with Eve who has already assisted hundreds of business owners increase cash-flow, grow profits, and ensuring businesses fetch the highest price when it comes time to sell.[/box]

 

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2016-12-20T13:09:03+00:00