Wednesday, January 23, 2013
Do you have an exit strategy?
Small business owners wear many hats and it is often hard for them to find the time to do strategic planning. We try to encourage our clients to sit down once a year to see where they have been and where they are going. This doesn't have to be done at the end of the calendar year if this is a hectic time of year for you. We usually do this in the early fall as we are very busy in December and January!
Planning your exit strategy should be an ongoing process. If the business has more than one owner, it is vitally important to keep everyone on the same page as to where the business is going and how it will end. If the plan is to sell the business some day, keep in mind that a potential buyer will want to look at your financial statements and accounting records. Getting and keeping these in order is important and the sooner you do it, the better. When you are taking draws or paying bonuses, keep the big picture in mind. While keeping profits to a minimum helps reduce taxes, it may limit the attractiveness of your business to potential buyers. You also want your accounting to have enough sophistication to impress a larger company. Simple works initially, but corporations expect to see prepaids and accruals on the books so if selling the business is your long range plan, consider adding these accounting conventions to your process.
It is also good to start establishing a persona for your business that is not tied so closely to you. If you are the business, who will want to buy it? You need to have procedures and processes in place which can be duplicated by a new owner. They want to see that your customers or clients will stay with the business in the event of an ownership change.
Take some time at some point in 2013 to work on your exit strategy.