Thinking of selling? Maximise the value of your small business with an exit plan

June 11, 2020 Thinking of selling? Maximise the value of your small business with an exit plan

How can you maximise the value of your small business? Use an exit plan!

You should make more out of selling your business than you do in annual company profits – but some small business owners have to settle for less because of a lack of planning.

Many do not think strategically about their exit from the business and just decide to sell when they have to or wait until it is too late and the business is already failing.

You can maximise your small business valuation by planning well in advance of selling.

Small business valuation: when you may have to settle for less 

Most small business owners do a great job of establishing and building their business but they are disappointed when it comes time to reaping the rewards! 

Unfortunately, many business owners who spend years building their business will receive only a fraction of what it is actually worth.

Sometimes, if ownership is transferred to a family member, they see their legacy destroyed through lack of preparation and planning.

Sadly, many business owners reach a time when they want or need to sell, only to find that their business is worth very little, there is literally almost nothing to sell, and there is no buyer anyway!

This is what’s known as the ‘tragedy stage’.

Avoid selling at ‘tragedy stage’

You want to avoid being forced to sell your business during the ‘tragedy stage’.

This is where a business owner has no real plans, has low energy levels, is losing passion and motivation, and just wants to get rid of their business.

Business sales have started deteriorating and the owner wants out.

Business owners in this situation have often overlooked their exit strategy until the last minute.

It’s understandable but regrettable.

Whether you’re getting ready to launch your dream start-up or are knee-deep in daily operations, the last thing you’re thinking about is the day when it all comes to an end.

But that day does come and you’ll want it to have all been worth it.

As difficult as it may be, you need to start planning your exit from the beginning of the business.

Maximise your small business valuation with an exit strategy 

An exit strategy is a key element of any business plan. It will help you maximise the value of your business and minimise the pain of closing it down.

In fact, a well-planned exit doesn’t just set you up for the day you sell up or retire. By designing your business around maximising the exit price, you’re effectively implementing value- and profit-boosting strategies that can start benefitting your business today.

The ideal stage to sell your business is after positioning it to maximise value, personal wealth and personal wellbeing.

You can rarely reach this stage by accident. You need to plan for it.

Research suggests that there is a high probability that developing an exit plan 12-36 months prior to selling the business will dramatically increase its value and the ultimate net proceeds for the business owner(s).

Key considerations for an exit plan 

Your exit plan should consider market, as well as personal and business cycles matched against personal goals and expectations.

It should be built into your overall business plan, aligning financial and personal goals to ensure you reap the maximum reward from all your hard work.

You may find that it’s best to work with an adviser, who can:

  • Assess your business in its current state to uncover where improvements can be made to achieve greater profitability and sale value
  • Examine the various options available for exiting and the range of possible outcomes
  • Advise you on business valuation and the most advantageous time to sell
  • Provide advice on tax efficiency and possible methods for reducing tax payable upon sale
  • Provide a structured plan towards retirement or business sale that can help you achieve greater profits and efficiency straight away
  • Help you maximise sale proceeds by assisting you with the negotiation process
  • Better prepare your business for an unexpected or urgent need to exit

No matter what stage of life your business is in, as expert exit strategists we can help you with all of the above.

Working alongside you, Pretium Solutions can create an exit plan that prepares you well for what’s around the corner, helps you achieve what you want to achieve, and maximises the value of your business.

Contact us for more information.

We also offer a Client Advisory Board service – a great resource for every business. You get industry experts in your very own board of advisers, ready to guide you through creating an exit plan or improving other aspects of your business. To learn more about this exciting service, contact us.