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January 2007
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March 2007

Planning for an exit

Many business owners don’t explicitly plan their exit from the business.  This is for a host of good reasons; it may feel too early in the evolution of the business, they may have no realistic idea of its worth, or there may be no-one at board level with whom to discuss it.  Just as likely they will be too busy dealing with the day to day pressures of managing growth to think about it.

It’s never too early to start planning.  In an ideal world, with perfect markets, one might wish to plot the growth in value of the business over time and with perfect foresight sell just as the graph reaches its peak.  Sadly this is not possible in the real world.  As a result too many business owners fail to maximise value as a result of not planning their exit.   The worst outcome would be to sell once the business is past its peak.   Selling before the peak at least allows the seller to persuade a buyer to pay handsomely on the basis that the business has growth to come.

A further complication is that some businesses are just difficult to sell.  Any planning must incorporate some recognition of the need to change the company to make it more marketable in the future.

Research suggests that Business Exit Strategies are in the top five topics business owners wish their advisers could talk with them about.  Too often this doesn’t happen.   PEM Corporate Finance is holding a seminar on 21 February specifically for business owners to address these issues.

We work with business owners to devise strategies for business exit at some time in the future.   This involves an early appreciation of what they want not just from the business, but in life, an assessment of business value, and what will drive value in the future.  Very often this leads to a process of grooming, or preparing the business for a sale.  The sale may be in the short term plan, or a long way off, but it’s often still very important to begin the grooming process. 

The exit when it comes can take many forms, a sale to management in a succession buyout, the piecemeal sale of subsidiaries and assets, through to a planned disposal of the entire business.

As Edison said “Good fortune is what happens when opportunity meets with planning”.  So rather than hope that a buyer with deep pockets will emerge at the right time, whenever that may be, start planning your exit now.