How to prepare an exit strategy for your business

When you're focussed on setting up and growing your business it's easy to overlook creating a business exit strategy.

Owner and director of business for sale website nzbizbuysell.co.nz, Richard O'Brien, says creating an exit strategy is a straightforward process and an essential part of any good business plan.

"Without an exit strategy business owners can be left with a business they can't sell or one that they can't realise a good price for when they do sell," says Richard.

"Owners should also never assume that their children or family members will want to work in the business or have the necessary skills to keep it afloat."

Richard offers this advice on preparing an exit strategy:

Start Now
It's important to consider the future of your business now. As the years pass opportunities to increase its value and selling price can be missed. You don't necessarily need to achieve everything at once but make progress in steps.

Transfer your skills
If possible make your business less dependent on you by transferring key skills or relationships to someone else in the company. New buyers want to know that the business can be run without the original owner.

Demonstrate your cashflow
What most buyers of a business will look for is a healthy cashflow. Buyers buy on facts so good systems and financial records showing a well run and profitable business, over a number of years, will attract a better quality of buyers and a better return.

Document your systems and processes
Make sure all your systems and processes for managing the business are working and documented. That demonstrates that the business is well run and that the transition to new ownership will be smooth and easy to facilitate.

Demonstrate that there is 'blue sky'
As part of normal business planning owners should be looking for new opportunities and considering what changes are necessary to keep their business growing. New buyers too will want to see that any business they buy has potential for growth.

Finally, Richard says owning and operating a business can be all-consuming so it's important to take time out for family, friends, holidays and to develop interests outside the business.

That means when the time comes to exit the business the transition is made easily because you are looking forward to new projects and interests.

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