Innovative Business Exit Strategies For SMEs
If you want to sell your business you need to prepare your exit strategies early to get the best price.
Effective exit strategies will tell you how to sell your business and what exit strategy valuation is most likely.
There are more than 10 exit strategies for small business - we can tell you which ones best suit your circumstances now.
What is an exit strategy?
An exit strategy is nothing more than a set of actions for the owners of a business to get out of the business. The exit strategy is the business plan or template for how the owner will exit the business and get the best price that the market will pay (market value).
The more a business owner is prepared, the more likely they will find a buyer that will pay a premium to market value (strategic value).
In essence business owners have only two ways to exit the business:
Sell their ownership to another party in some planned transaction.
Shut the business down, preferably in an orderly manner rather than through a forced liquidation process.
In many cases we see exit strategies being more unplanned than planned - and the business owner is often forced into the second option. Usually because the owner has not made themselves aware of the options early enough.
Why Have an Exit Strategy for SMEs
The usual reason a person becomes a business owner (whether it is a startup business or a business acquisition) is to increase their wealth. There is also personal and lifestyle reasons as well, but unless you are operating a not-for-profit organisation then you still want a good return on investment.
For this reason it is always wise to "...plan with the end in mind" regardless of the stage in the business life cycle.
Having an exit strategy for SME's means that you stand the best chance to:
Get the best price and maximise the return on your investment.
Exit the business on your own terms at a time that suits you.
Protect your existing wealth.
Generate an income for retirement.
Create the lifestyle you want post-exit.
Successfully pass on the business to your management team.
Get the best tax outcome for you or your family.
Create a new strategic direction that will help grow your business.
Trying to leave a business and get the best price you want without enough preparation is like playing Roulette with the sale of your business - in most cases the house wins - and that isn't you.
Benefits of an Effective Exit Strategy Process
An effective exit strategy illuminates the factors that lead to the best price for the most valuable asset you own. Having a well defined exit strategy process makes sure you work out all the opportunities you have - not just leave it to chance.
The benefits of an effective exit strategy process include:
Increasing the likelihood of achieving the price you need for the business.
Identifying the fastest process to achieve the exit you want.
Reducing the risk of losing the investment you have made in your business.
Ensuring the business can continue without you as the owner.
An effective exit strategy gives you the best chance of realising the investment you have made in growing your business and contributing to a retirement you deserve.
The Top 10 Exit Strategies for SMEs
You may be surprised to know that there are more than 10 exit strategies available to an SME.
Each exit strategy is likely to attract a different style of buyer and achieve a different price.
But exit strategies come with trade-offs between complexity and time. This can cost the business owner in terms of business value, stress, meeting deadlines and lifestyle choices.
Even privately held businesses can benefit from exit strategies that tend to be reserved for larger companies, which include:
Private equity investor
Venture capital investor
Merger and acquisition (M&A)
Initial Public Offering (IPO) - smaller companies can use the secondary stock exchange board called the National Stock Exchange (NSX).
Exit strategies will not be the same for all businesses - not every business will be able to list on the ASX. And not every business will benefit from a simple trade sale.
But the best way to get the return you want on your investment is to be prepared and take the time to develop exit strategies that are effective for your circumstances.
What Are The Key Elements of an Exit Strategy?
There are five key elements of an effective exit strategy:
What are the owners expectations?
Who will buy the business?
How much are they likely to pay?
What are the best strategies to increase the value of the business?
How will the exit be implemented?
But an effective exit strategy is not just a once-through process. An exit strategy process must sometimes revisit earlier steps so as to maximise the likelihood you will have a successful transaction.
Our Exit Strategy Planning Process is a staged approach at getting you the best outcome in the least amount of time that is appropriate.
We make sure you have a clearly documented plan, identify opportunities to increase the value of your business and select the strategies that suit your circumstances and objectives.
Our Exit Strategy Plans become your pitch deck in attracting the best price for your business.
We can provide a fixed price quote on a staged-approach that meets your budget, time constraints and most importantly your expectations of realising the value of your business.
The Local Differences in Exit Strategy Melbourne and Beyond
Our exit strategy process is the same regardless of the location. Whether you are looking to sell a business in Melbourne, create innovative exit strategies in Sydney or retire from your business in Brisbane the process is the same:
Understand your exit strategy valuation
Cash in on your business improvement opportunities
Identify and attract buyers
Secure a deal
We have explained some key steps of exit strategies, Melbourne or any other area, in our recent blog posts:
However there are unique issues with each location. For instance Melbourne is not blessed with the plethora (a lot!) of theme and adventure parks. Sydney has different transport and logistics profiles than Melbourne. And Brisbane has a different food manufacturing profile to Melbourne.
The key is to find out what your buyers want and what features of your business are attractive to them - and pitch to that message.
What Exit Value Advisers does best is to target the features and opportunities that your business has that creates a great exit valuation - and communicate these to target buyers.
An Exit Strategy in Melbourne will emphasise the features that will attract buyers from your local areas as well as interstate. And our exit strategies for businesses in other states will harness the opportunities those areas have.
This is how we create the best exit strategy for your business - looking for the opportunities that other businesses can leverage by acquiring your business.