Plan your business exit strategy like a boss!

Is 2024 the year you’re intending to focus on your plan to reach the door marked ‘exit’?

As a business owner who has worked tirelessly to develop a respected profitable brand, are you now eyeing ‘life beyond’?

Our latest blog looks at readying yourself for that transition. What is the perfect business exit strategy?

What was the first resolution which came into your mind as you headed toward the start of January this year?

As a company owner, were you fixated on higher profits, more acquisitions, new services, a growing team… or finally ‘letting go’ and embarking on the process of identifying types of business exit strategies?

Our client base is full of owner-managers (many of whom may run a business with a family member) who are very clear that at some stage in the future they’ll be looking to navigate a business sale.

They may have in mind a vague timeframe, and perhaps even an expectation for what financial reward they might hope to achieve, but research suggests as few as 45% of business owners actually have in place a comprehensive exit plan or have carried out any significant business exit planning.

In truth, the only way to ensure you accomplish the right transition out of your small business and into your next ‘life chapter’, is to prepare to prepare.

An HR Audit is a great place to begin, when in the early stages of looking at selling your business and attempting to achieve the right sale price.

Your business valuation will doubtless be enhanced if there is clear and precise evidence as regards your employee documentation, your policies, and your overall compliance.

The following are among the key areas to explore in your audit:

• What employee contracts, commitments and non-compete clauses exist?
• Are you robustly compliant with all aspects of UK employment law? Remember, your potential purchaser will want the confidence of knowing they are taking on a business which is legally sound in every way.
• Data accuracy. Your buyer will be looking to understand their employment liability at the point of purchase, so the more detailed your HR data, the easier you make it for said purchaser to comprehend what commitments they might need to consider for the immediate and longer term.

Beyond the specific one-time activity of an audit, you may want to use this valuable pre-purchase time to explore other factors of your HR organisation.

Retained HR provision can be really helpful in aiding you with this, and elements might include the following:

• Consider how effectively your employee team can continue to function, as and when you should choose to exit. Do all decisions rely on you, or can the new purchaser have faith that there is competence across your structure to move forward without you?
• What is your retention strategy for existing and experienced staff? How will the new owner be assured that you have worked hard to consider the reward and retention of employees?
• Is your existing culture serving you well to get you in a strong place for sale? Will a potential buyer find a company with an enthusiastic and productive workforce, where everyone feels valued and engaged?
• What is the strategy for building team capability in time for a purchase process? How will this impact the management team? The more you’ve worked on this with the help of HR support, the shorter the earn-out period is likely to be.

View your preparation now as fundamental to a successful sale in the months or years to come, regardless of whether you’re likely to elect for a management buyout, an IPO (initial public offering), or one of a number of other common exit strategies.

Your goal is to produce a solid strategy, aligned with market conditions, which serves as your well-considered roadmap for the long term.

Should you want to know more about other non-HR factors concerning succession planning, we recommend a helpful tips list from Succession Plus, which is a specialist in the area of business exit. Download their white paper below, containing 15 tips to maximise and extract the most value from your business.

To chat with the MAD-HR team about preparations for selling or succession, please drop us an email.

Photo by Dustin Tramel on Unsplash