Sascha R. Rowold

The exit process

The process you will have to go through will depend on how you are exiting the business.

Selling the business
If you are selling the business there are several stages you will go through:

- grooming your business for sale
- valuing your business
- identifying and marketing your business to potential buyers
- negotiating with potential buyers
- completing legal due diligence
- finalising the sale and transferring ownership

Prior to the sale, you should get the business into shape by reducing overheads, debts and excess stock and getting your finances into good order. You will also require detailed financial information, including audited accounts and forecasts which you can prepare in advance. I will provide some detailed information on all these detail issues soon.

You should seek specialist advice from your accountant, solicitor or corporate adviser. They will help you reach a realistic valuation, and identify and market your business to potential buyers. I will provide some additional information on how to value and market your business soon as well as on how to complete the sales process.

Flotation
Businesses planning a flotation will go through a similar process and will require a detailed business plan, prospectus and accounts which comply with specific accounting standards. I will provide some detailed information on floating a business soon.

Closing the business
If you are simply closing the business, the process should be much simpler. You should contact the relevant authorities to advise them you are closing down and calculate and pay off any outstanding liabilities (such as VAT) and debts.

If you have employed any workers you will also need to give them the proper notice and any outstanding pay and benefits. Employment laws differ in every country need careful planning.

Decisions that could affect your eventual exit

It is easy to forget that the decisions you make today will not only affect how successfully your business gets off the ground, but can also seriously impact on your eventual exit from the business.

Key considerations

Business form - the legal structure you choose can restrict your exit options and affect how potential buyers view the business. For example, a sole trader can simply close the business and pay off any outstanding liabilities but a limited company with a separate legal identity will probably be more attractive to potential buyers.
Articles of Association - these set out the rules for running the company affairs. If they are too restrictive they could limit what the business can and can’t do. This could put off potential buyers or investors who are looking to diversify.
Partnership agreements - these may specify what will happen if one of the partners wants to exit the business, eg due to ill health or retirement.
Property agreements - these can be notoriously difficult to get out of, if you need to, without suitable break clauses or the right to assign your agreement to another party.
Shareholders - the involvement of shareholders with voting or preferential rights can make it more complicated for an outside investor or buyer to take over the business.
Capital and ownership structure - straightforward structures can help make your business more attractive and can minimise potential barriers to sale.
Accounting procedures - good accounts will give potential buyers and investors more confidence in your business and make completing the sales process easier.
Employee/customer/supplier contracts - clear, simple contracts for all business relationships can help avoid disputes, clarify responsibilities and make it easy for potential buyers to see what they would be taking on.

Before committing to any important decision it is vital to seek advice from a suitably qualified expert. See our guide on how to choose and manage an accountant.

When you’re setting up your business it’s essential to think about how you’ll ultimately end your involvement with it.

A well thought-out exit strategy can help you to maximise the value you get from your business, successfully market your business to potential buyers or investors and ensure you end your involvement with as little disruption to the business as possible.

Regardless of whether your exit occurs to a planned schedule or you are forced to make a move for unexpected reasons, the decisions you make when setting up can affect how easy it is for you to eventually exit your business.

This “guide” provides an overview of how some decisions can affect your ability to exit the business successfully, and shows you how to prepare and manage your business to maximise its value. It also covers the different exit options available and outlines their advantages and disadvantages based on my personal experience and some research.

Why you need an exit strategy:

If you’re setting up a new business you’ll have a clear vision of what you want to achieve from it. To maximise the value you get from the business it’s essential to think about how you’ll leave it further down the line.

Carefully planning your exit from the business can help you to:

- mould your business into the ideal shape for your chosen exit option
- maximising the value you get from it
- groom successors if they’re coming from within the business - whether they’re a family member or part of your management team
- exit at a time of your choosing, when the business is doing well and the market conditions are advantageous

Ideally, you should include an exit strategy in your start-up business plan. It can then be reviewed and revised whenever you work on your annual business plan and budget - and you can steer your business in the direction that your exit option demands.

If you manage an existing business and don’t have an exit plan, you should now think about what your preferred exit option might be - and consider whether you could change the way you run your business to help you achieve it.

The way in which you exit can affect:

- the value you and other shareholders realise from the business
- whether you receive a cash deal, deferred or staged payments
- the future success of the business and its products or services
- whether you retain any involvement in or control of your business
- your tax liabilities

… change will come as a shock, as bad news and personal change happening unexpected and that will change how one was looking and evaluating their peronal situation, sometimes based on 3rd party comments, on speculation and overestimation of their own personal situation or their supporters. Some even think it can be stopped…

Only a few really value change, see the chances and adapt accordingly thus better position themselves for the new enviroment and the new order of power. These few will step up and surf on the new wave, the many that don’t will suffer loss and a hault in their careers and lifes.

Where does this happen? Everywhere in todays business world, and even in our personal lifes.

Over the last couple of months one was able to witness some dramatic changes in large corporations and most of us, me for sure, in our personal enviroment. Whereas most of the big crisis, like the financial crisis in the US and some parts of Europe, affect us very little, most people not at all, the changes close-by are the ones we should really look out for, not seek power-struggles, engage in fights we will loose.

I personally hate the idea of adapting to situations not created by myself, having to change, but, I am certain, that this ability, to jump your own shaddow, to anticipate and adapt before the actual change, will position everybody for a better future.