Failing to maximize the exit value of your business could cost you millions of pounds. Not having a clear alternative to sale could mean that your business loses its way and that you fail to build value in your investment. Sir John Harvey-Jones remarked that “Planning is an unnatural process; it is much more fun to do something”. He went on to say that “the nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression”! In reality, quite apart from the potential financial downside, not having a plan is a discomforting experience for entrepreneurs and business owners alike. Having a decent plan gives a feeling of control – which is a good basis from which to take appropriate risks and to drive the business forward.
A key element of your strategic plan should be working out how to exit the business at a future date. Alternatively the priority may be to put in place a plan for succession within the business. Perhaps the exit may be by way a sale to managers in a VIMBO or vendor initiated buyout – sometimes called a succession buyout. This involves not just preparation of the business financially, but also some forward thinking about the management team.
Even if there is no prospect of an exit for some years to come, it is important to have a clear path for growth and a view of what the business might be worth now and in the future. With a better understanding of value drivers the business can be groomed for value growth or eventual sale. This is useful even for a very young businesses – it can help to explicitly shape the business to suit the objectives of its owners. Tax is important too, and putting in place strategic objectives of this sort allows early tax planning to align corporate and personal tax strategies.
We are running a series of highly focused events on the topic “Business Exit Strategies” to address these issues. They are practically focused with interactive sessions and aimed squarely at business owners. We hope that attendees will come away with a realistic view of what needs to be done to evolve and implement a strategy for growth, exit, or succession. The events run in November in Chelmsford, St Albans and Milton Keynes, and again in Cambridge next February.