How to Take Charge of the Exit Planning Process
How to Take Charge of the Exit Planning Process
Every owner will exit their business at some point. There are many reasons why an owner may sell the business, but what is important is they have a plan to exit.
More than likely you will have a large percentage of your net worth tied up in your business, and you can maximize the value of your business by creating an exit plan. The Value Builder System analyzed more than 40,000 businesses and determined that firms with an exit plan sell for 71% more than companies that don’t have a plan.
This article defines exit planning, and why planning is important. You’ll read about the steps required to create an exit plan, and how Raincatcher’s exit planning services can help.
What is exit planning?
Exit planning is a strategy that owners use to exit a business. It’s a comprehensive approach that addresses financial, legal, tax, and management issues that must be addressed when an owner leaves the business.
Company founders are people who take charge, and you can use that same mindset to plan for a business exit. If you create an effective plan, you have more control over these factors:
- Timing: When you leave the business
- Sale price: Maximizing the amount of sales proceeds that you receive
- Transition: Create a smooth transition that benefits your employees and the buyer
Perhaps most important, exit planning helps an owner determine their priorities. Some owners are comfortable selling to a third party, while others feel a strong need to sell the business to their employees. Planning needs to start years before an owner plans to leave the business.
How to create an exit plan?
The business sale process starts with knowing what your business is worth.
Getting a company valuation
Raincatcher’s industry-leading team of experts has behind-the-scenes access to all of the best valuation methods and tools available. They also have their finger on the current pulse of the market, and they understand your industry.
Most importantly, they know how to analyze and interpret all of the available metrics and data to give you a fast, accurate, reliable, and 100% confidential business valuation.
Once you have a valuation, you may decide to make improvements to your business and increase the value.
Improving your business
Here are some strategies you can use to increase your firm’s value, and to maximize the company sale price.
Build a talented management team
A good manager will use their talents to make smart business decisions and increase company value. Take a look at your organization, and hire managers to fill each important role. This strategy helps you create a business that can thrive without your day-to-day involvement, which is a value driver that is important to a buyer.
Document business operations
Valuable businesses operate efficiently. They can complete routine tasks quickly so that key employees can spend more time on company growth.
Document each routine task that you perform, how often the task must be completed, and who is responsible. Compile this information in a procedures manual, and share the manual electronically with your staff.
Improve your accounting system
Accounting is the process of gathering source documents, posting accounting entries, and creating financial statements. Your accounting system must post information in a timely and accurate manner, so you can generate reliable financial reports.
To improve the process, make sure that you leverage technology by using an accounting software package like QuickBooks. Move away from paper files by scanning documents and saving them on the cloud in software like Dropbox or Google Drive. Integrate your accounting software with payroll, banking, and credit card processing.
Physical inventory count
If you’re a retailer, wholesaler, or manufacturer, you may have a large dollar amount of inventory. Perform a physical count that compares each item in the accounting records to the physical items in your store or warehouse. A physical inventory count is the best evidence to confirm that the accounting records are accurate.
There are a number of other documents you’ll need to review, and possibly update.
Organize and review documents
If you can organize and review records in advance, you’ll spend far less time preparing for the due diligence process. Review your insurance policies, disaster recovery plans, and contracts with customers, employees, and vendors. Keep your files updated, so you’re ready for the due diligence process down the road.
In spite of your best efforts, you may have to overcome some obstacles during a business sale. To plan for your exit, decide if these potential roadblocks apply to your company.
Overcome obstacles to a sale
These issues can have a negative impact on a business exit, and reduce the interest level of a buyer:
- Working capital: Does your business generate enough cash inflow to pay for company operations? If your cash flow forecast does not project enough cash inflows to operate, you may have trouble finding a buyer.
- Can the business operate without the owner? As mentioned above, a buyer wants a business that can grow sales and profits after the owner leaves. You need a plan, and an experienced management team to implement the plan after your exit.
- Documentation: The buyer needs data, in order to fully understand your business, and how to operate after the sale. If you’re missing records, or have poor documentation, a buyer may lose interest.
Planning for a business exit requires a great deal of time and effort. Fortunately, Raincatcher has created a system that makes exit planning much easier.
Raincatcher’s exit planning service
If you work alongside Raincatcher’s exit planning experts, you will transform your business into a built-to-sell enterprise in a matter of months. We’ll guide you through our proven multi-step process designed with one goal in mind – maximizing the value of your business at exit.
Our service addresses these important points:
- Find ways to scale your business
- Increase the value of your business
- Unleash the power of your financials
- Develop a scalable sales and marketing strategy
Our process focuses on key drivers of value that buyers assess when looking for a company to acquire.
Our exit planning fees are built into the cost of the sale. With proper preparation, you can get a 71% value boost in the sale of your business, which will more than cover the cost of working with our team.
Contact Raincatcher and start creating an exit plan to maximize the value of your business sale.
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Certified Exit Planning Advisors