Guide to Developing an Exit Plan for Your Business
As a business owner, you are sometimes forced to make tough decisions. And one of the most challenging decisions you can make is to close down your business. Whether it is a part of a long-term plan or a decision forced on you by circumstance, closing down a business is never easy – neither financially nor emotionally. So, to help you better prepare for this scenario, we will outline a comprehensive blueprint for developing an exit plan for your business.
What is an exit plan?
In most instances, an exit plan is involved in closing down a business. But, it can also be a plan that you use to transition your business to a new phase. Or it can also be to reimagine your business with a new brand. In practical terms, your business will no longer function as it did before.
A substantial rebranding may also require developing an exit plan for your business.
This robust, all-encompassing change is precisely why you need to have a good exit plan. Just like starting a business was hectic and entailed multiple factors, so will closing it down. And the better you prepare for this battle on various fronts, the smoother the entire process will be.
Developing an exit plan for your business
Before you start developing an exit plan for your business, it is important to consider what state your business is in and your goals for it. If your business is doing well, you ought to look for maximizing profits. On the other hand, if it is doing poorly, you need to focus on minimizing losses. While these may seem similar, they will entail a different mentality and a whole different approach in practice.
It would be best if you also considered whether you are liquidating your business or selling it to a new owner. In the first case, your goal is to yield the best profit while helping your employees transition. In the second, you need to outline what the new owner will be like, and help them get a hold of your company. None of this is straightforward. But it is why you need to have a solid exit plan to rely on. The sooner you start developing it, the easier it will be to tackle.
Step 1: Finances
The first step you need to take is to outline your finances carefully. Every aspect of your business needs to be accounted for, including:
- Expenses (both ongoing and projected).
- Business performance.
- Employee salaries.
You also need to take into account all the services that will play a role in the closing down of your business. This process will entail moving out all of your office possessions and relocating them to a new address. While professionals can help with any task and provide moving services in Florida, they will need to be paid. And if you need to deal with heavy machinery, these services can be costly.
It is paramount that you have a deep and thorough understanding of the company’s finances.
All of these are a part of your business and will play a role in how much it is worth. The better you understand this, the easier it will be to negotiate a reasonable price for your business. Furthermore, you will have a good idea of which options are acceptable and what potential owners can expect to gain.
Step 2: Consider your options
Once you have a clear idea of your finances, you can make an educated decision on what to do. As we said, an exit plan can entail a multitude of options. You can sell your business as is to a new owner. Liquide it completely. Or even have it become a part of a different franchise. These can be viable options depending on your finances and what choices you are presented with. So, weigh them out carefully and consider the long-term implications of each one. Don’t shy away from getting legal and financial advice if you cannot make up your mind.
Step 3: Inform the investors and shareholders
Once you’ve settled on an exit plan, it is necessary to inform your investors and shareholders. They are a part of your company and have every right to know what is happening. For this step, you will also need a detailed report of the company’s finances and what the future projections are like. The better you understand the financial data, the better you will be able to explain your decision to the investors.
Step 4: Tell your employees
The next thing to do is to talk with your employees. Understand that most of them won’t take the news lightly and that you need to be ready to answer their questions. Try to be empathetic and find ways to help them through this challenging period. If they are getting new leadership, try introducing them to their new leaders and easing their transition.
Make sure that your employees fully understand your exit plan and your reasons behind it.
Step 5: Inform customers
The last step is to inform your customers of your plans. If there is a new owner, make sure to introduce them and provide a thorough explanation of what is going on. If you plan to liquidate, thank your customers for their business and recommend alternatives.
We’ve outlined the broad strokes of developing an exit plan for your business. Depending on how robust and complicated your business is, you may need to include extra steps. But, even if your business is relatively simple, you ought to start developing your exit plan as soon as possible. If you need help, know that there are professionals that specialize in developing an exit plan for businesses. The moment you decide that you are exiting your business, you need to start planning for the months ahead. Know that there are plenty of things that can go wrong. And the more time you give yourself to prepare, the easier it will be to tackle unforeseen circumstances.