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Planning for an exit strategy

Discussion in 'Money matters' started by nathalie1, Aug 1, 2020.

  1. nathalie1

    nathalie1 Member

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    Hi everyone, I am kind of new to this forum but I was wondering if anyone ever thinks of planning for an exit strategy?
    For example if you ever want to sell your business or plan to in a year or so, do you maintain a structured/consolidated information of all your business (financials/valuations etc.) for when you plan on selling?
    Is there a best practice out there or software that would allow you to do so and if not, would you rather have one if there was one out there?

    For those that have sold their business before, would you have preferred getting professional business advisory on some parts in hindsight?

    Thank you!

    Nathalie
  2. bb1

    bb1 Renowned Member

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    A well run business would have this information available, even if they don't plan on selling. It is critical that all business's have a structured/consolidated view of their financials, etc from day 1 to day xxxxxxx
  3. nathalie1

    nathalie1 Member

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    Bert, but what about the remaining aspects of selling a business or planning for an exit strategy?

    We often talk about starting and growing business but it seems as if the exit planning strategy is never provided for founders looking at exiting or selling their companies within X years.

    Do you have any insight on how to effectively plan for an exit and avoid the stress that comes with rushed sales and disappointing valuations?
  4. cameronryan

    cameronryan Member

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    Hi Nathalie, planning properly for an exit/ sale is so important if you are wanting to maximise value and complete the sale in a timely manner. As a business broker, I see dozens of businesses every year that are considering selling but very few that are properly prepared.

    I agree with Bert that a well run business should produce consolidated financial info daily/ weekly in normal circumstances, not just when selling. But there is a lot of other information (financial and non-financial) that is also very important to have available should a business be placed on the market for sale.

    The two biggest sales I've facilitated were the easiest two sales I have facilitated. This was mainly due to thorough and well executed planning prior to sale. Would be happy to discuss with you further if you wish.
  5. Mel S

    Mel S Member

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    Hi Nathalie,

    Yes, it is beneficial to have a plan in place if you’re planning to sell your business. Refer to the link below for more info re: pitfalls you can avoid by having an exit plan.

    Ideally, it is recommended that you put a plan in place 12-36 months prior to when you want to sell the business. At a minimum, you should put a plan in place at least 6 months prior to selling the business if you can’t do it sooner.

    Yes, there is a best practice methodology and software that will allow you to do exit planning. The MAUS methodology has been recommended by the Exit Planning Institute in the USA and the Institute of Exit Advisors in Australia. MAUS is the leader of exit planning solutions in Australia and the US.

    I’m a MAUS certified advisor and network partner. We have some questionnaires which you can do to assess the financial health of your business and to determine the state of your readiness to sell the business (see link below re: questionnaires).

    The link below also provides more info about our exit planning process including some statistics from Exit Planning Institute that might help you decide if you want to use a business advisory service or not. However, it is recommended that you seek relevant professional advice appropriate for your personal circumstances.

    You will receive complimentary free reports and some of the questionnaires only take 7 minutes to complete. Here’s the link to help you get started with your exit planning for free:

    https://bit.ly/3lyAEHU

    If you want more information, please do not hesitate to reach out. I’d love to help.
  6. BusinessTrade

    BusinessTrade Active Member

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    I imagine those businesses that you are speaking of were most likely thinking of selling due to necessity rather than exercising a well planned exit strategy.

    Felix
  7. Paul - FS Concierge

    Paul - FS Concierge Administrator Staff Member

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    Just a guess.

    Most people understand and execute on the complexity of their own business. They often take years to develop their expertise.

    That expertise doesn't often translate to the expertise needed to properly prepare a business for sale.

    My own observation is also that a lot of people want to cheap out when it comes time to sell.

    And another group way overestimate the value of their business.
  8. cameronryan

    cameronryan Member

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    Hi Felix,

    Yes, unfortunately most businesses do end up selling due to necessity rather than a well timed and well executed exit strategy. But I think this comes down to most people starting/buying a business with great intentions, enthusiasm, plans, etc and giving an exit strategy absolutely no consideration at all. An exit strategy should be considered at the time of starting/buying a business, not when it becomes a necessity.

    If I look at certain franchises, it can cost $300,000-$600,000 to establish a franchise and very rarely can this be recouped upon sale. Hospitality - people throw hundreds of thousands of dollars into opening a swanky, trendy cafe or restaurant with little thought as to what profit they need to generate in order to sell the business at a level that repays their initial investment.

    There is an abundance of information available online for 'business plans' and 'starting a business'. There is about 25% the volume of information available for 'business exits' and 'selling a business'...
  9. BusinessTrade

    BusinessTrade Active Member

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    Very true. Most business owners only start planning for an exit when it too late.

    A business is a large investment - not only in money terms but also time, and business owners should definitely have at least some resemblance of a plan to successfully exit in order to maximise their ROI. (Workers have their super, small businesses have their business!)

    Unfortunately, many business owners get caught up in the day to day and don't end up thinking pragmatically about maximising the value of their asset.

    Felix

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