Before you start a business, you should always know how it will end. No matter whether your business is a promising start up or flourishing multi-million pound organisation, an exit strategy should always be a part of your overall business plan. This is because, without a good exit strategy, your business may as well be worth nothing. After all, all things are only worth what someone would be willing to pay for them. And this includes your business.
Why is an Exit Strategy So Important?
Many people who decide to start up, or invest in, businesses, will end up sinking significant amounts of money into the company. This money can be used for all sorts of purposes, from staffing to acquiring resources or conducting marketing. And, when the business is finally sold, the people who put money into it will want to get their money back out again.
This is why it’s so important that you have a good exit strategy for your business. It will ensure that you are able to sell your business for the best price possible. It will determine best practice for disposing of remaining assets, and tying up all other loose ends. And it will help you to dispose of your business in accordance with the law.
Types of Exit Strategy
There are two distinct types of exit strategy which a business can have. One involves the company being sold, preferably for a sum which exceeds its debts. The other can be defined by how the company’s finances are managed whilst it is still profitable. A company in which huge salaries, bonuses and special shares for top execs are the norm, is commonly referred to as a ‘lifestyle’ company. The business is used to fund the lifestyles of the top execs and owners, who bleed the company dry throughout its existence. This is, in itself, a type of exit strategy, although one that is frowned upon, and one which will not leave any room for future ROI.
Creating an Exit Strategy for Your Business
There are many different types of exit strategy which you may wish to consider for your business. These include:
- Selling Up
- Selling Via the Stock Market
- Getting Bought Out
If you are a long way from shutting your doors, it’s best to investigate the potential benefits of each, so that when the time comes you will be prepared for any eventuality. However if you face a sudden closure and find yourself struggling to dispose of your company in a financially beneficial way, you may wish to think about the benefits of selling a company with Axis Partnership.
Things to Consider When Formulating Your Exit Strategy
All good exit strategies are dependent upon one thing. That the business in question has as few debts as possible, no legal troubles, and that it is commercially attractive to potential buyers. This means that everything which happens during the course of your business’ life will be taken into account, in order to get the best overview of your company as is possible. Therefore, in order to have a great exit strategy, everything you do during your time as business owner should be geared towards making your business as lucrative for potential buyers as is possible.
This means, keeping the legal structure of your business simple, ensuring transparency and disclosure in all company affairs, keeping the number of primary shareholders as low as possible and simplifying internal structures and procedures across the board.
In addition, before it comes to the point where you will be selling your business, it’s always a good idea to seek the advice of a qualified business selling expert, such as those at Axis. This will ensure that, when the time does come, you’ll be ready.