Market volatility and economic uncertainty inevitably leave business owners wondering about the future of their companies. Whether you’re planning an exit in the immediate future or just weighing the possibility of leaving someday, a crisis is a great time to contemplate your business exit plans. The COVID-19 pandemic has changed the M&A world, but we expect it to bounce back. Here are some strategies to adopt now to plan an exit from your business, whether you hope to leave soon or just want to keep your options open in the future.
Create or Revise Your Exit Plan
Your exit plan is not something you can do just once and then forget about. This is a living document that must consistently evolve in response to market conditions. Your exit plan should address every aspect of your transition, including each option for your company’s future, wealth management issues, preparation, and more. Some questions to consider asking when drafting your exit plan include:
- Has the M&A environment changed in a way that your most likely buyer might shift?
- How has your exit timeline changed over time?
- Is your team, especially management, prepared for a sale? Can they navigate volatile market conditions?
- Are your more reliant on key customers or vendors than before?
- How has COVID-19 affected your industry? What has your company done to mitigate these impacts, and what can you do going forward?
Integrate Exit and Wealth Planning
Your exit plan is useless to you without an understanding of how your exit will affect your personal finances. A wealth plan helps you transition your wealth, as well as determine how much money you need to exit your company.
As part of this plan, you must identify key goals and objectives, then assign a dollar value to each. Next, build out timelines that fit your needs and your family’s desires.
Preparing for Your Exit
Every exit time has benefits and drawbacks, and there is no magic time to begin seeking your perfect buyer. Instead, you have to look at all of your goals in context, then assess how ready your business is for your departure. Here are some factors you need to consider:
- Key relationships: A network of relationships are key to your business’s success. You need to transition these relationships to the buyer by reducing your company’s dependence on you and showing your support for the buyer.
- Retaining key employees: Without your employed, your company cannot succeed. You may need to incentivize key employees to remain on board.
- GAAP compliance: Clean financial statements are non-negotiable when exiting your company. Work early with an accountant to ensure your that your bookkeeping is GAAP compliant.
- Communication plan: An exit is more likely to be successful when you control the narrative. Develop a communication strategy early, and make sure you get ahead of the gossip train. You must unveil key aspects of the transition at appropriate intervals, so competitors and others cannot capitalize on your departure.
About Vision Point Capital
For over 20 years, our team has supported our clients with comprehensive advisory services to help them with their complex business valuation and transition needs. Few other firms offer such a complete suite of business transition services as it relates to M&A, Valuation, and ESOPs.
Our client’s personal goals are at the heart of everything we do. We are well versed in advising clients across a broad range of industries and help them manage and navigate valuation and all the business transition alternatives available to them. In fact, when you work with Vision Point Capital, you leverage our resources, experience, and expertise to help you grow faster and optimize value for reaching a successful business transition.