Be Prepared to Exit – Strategies
At some point you are going to leave your business. Will you sell it and live on a yacht somewhere sunny? Will you retire graceful and leave it to your offspring? Or will you exit, feet first in a box?
People start businesses for any number of personal reasons, perhaps because they are fed up with being made redundant or they are fed up with working for someone else. After the initial excitement has worn off the business turns into a busy job that has expenses attached to it. Business plans start to become an important part of the business growth ethos. Even then the thought of exiting doesn’t readily spring to mind.
But what of retirement? And let’s get the depressing bit out the way …What if you suddenly face: Illness? Divorce? Accident? Or much worse, death?
Whether you need to or simply want to sell your business; you must surely want to maximise the highest value possible.
One of my early Business Link clients came to me when she was continuing to run the previously successful firm her husband had set up and ran before he died. Sadly she did not understand the business, she didn’t recognise the customers or suppliers and came very close to having a nervous breakdown before she locked the doors and walked away. The value had just seeped out of the business and what was left was just the auction value of the assets. Tragic!
The following method helps to safeguard the value of your business. It will take just 5-10 minutes a day to keep up to date and will cost you the price of a lever arch-file.
Preparing your Business for Sale
The content of this folder pulls together every piece of information that a potential buyer is likely to ask of you. For example:
- The last three years prepared accounts – this shows how well you have been trading recently
- Trial balance – which shows what the business looks like today
- The latest VAT return – which proves turnover and payments to Inland Revenue
- Your stock list if you have stock (keep it clean!).
- A list of your fixed assets
- Copy of the mortgage or lease agreements
- A list of current suppliers plus their contracts (which ought to be assignable to a third party), what you spend with them and the age of debts owed.
- The list of current customers plus their contracts and age of debt owed.
- Share ownership or partnership agreement
- The debt structure
- The management hierarchy, staff and contact details
- Details of your insurances and liability coverage
- Details of trademarks, and patents
This list is not exhaustive. There will be other items that are pertinent to yours and yours alone. Of course the bonus of the Preparing Your Business for Sale folder is that it doubles as a great Disaster Recovery Resource.
Finally don’t forget the detail. The way your business looks, its premises, its staff, its customer interaction is a vital part of first impressions. The little things make all the difference.