Medium Business exit strategies

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In the last post, I introduced the concept of different business categories and how each of these will be affected differently when establishing Your Business Succession Plan. 

Business Succession Planning is relevant for every business owner because one day, you will either want to or have to, exit your business. How this will occur will depend on the type of business you have and the type of outcome you are looking for.

Despite the type of business you have, you’ll want to maximise the cash flow and profits you receive when you exit, whether by planned or unplanned circumstances, particularly if you want the sales proceeds to fund the next phase of your life, or to assist your family to maintain their livelihood.

During the previous post I discussed Category One being the Sole Proprietor and how to maximise their outcome when they exit their business. 

In this session, I’ll concentrate on the second of the business types. If your business fits into Category Two, you’ll be the type of business owner that puts a large portion of your time and money back into your business.

Your goal is to build the value of your business in a manner, that, by the time you exit from it, will have grown to quite a valuable asset. More likely to be a medium sized business, your business is not reliant upon your services within it, because you’ve developed a team of people to fulfil all the tasks that keep it operational,and if you haven’t already, you are more likely to be developing a management team to oversee it.

Your succession plan will be different because your most ideal successor is probably already working in your team.  Usually they will be familiar with the business clients, systems and processes, products, services and suppliers, so this part of the succession plan becomes a lesser issue when passing on the baton.  

Your succession strategy can encompass many more options than that of the Sole Proprietor, but is no less vulnerable if you don’t take the action to formalise an agreement that overcome the six identifiable succession triggers (Dispute, Death, Disability, Divorce, Desire for change, Decision to Retire).

Due to the size of the valuable business asset you have built, funding the eventual buy-out will usually be a larger problem to overcome.  As a business owner wanting to extract your business wealth in cash, you will need to think outside the square, and a lot earlier, to ensure your potential successor has the financial capacity to pay you your rightful entitlements. This has become more of a problem in a market place that is inundated with tough financiers who severely scrutinize loans on business transactions and acquisitions.

Quite often business owners in this category are aged between 40 to early 50s, and don’t have a lot of personal assets, but tend to have more debt commitments because all available financial resources have been poured back into the business.  If you can relate to this scenario, it makes it more crucial for you to lock in a business succession strategy, that will release you of your debt commitments and protect your interests in a way that will maximise your financial outcome.

Do you want to know how prepared you are to Exit from your Business?

Take the FREE Business Exit Quiz to receive your customised report. It takes about 2-3 minutes to complete.

You can also Download 3 free chapters from the popular book, “Your Business Succession”.

If you haven’t engaged a Business Succession Strategy Team working together for your benefit it’s time to do so. Click here to Book your FREE 15 minute consultation with the Exit Experts Succession Strategist

In the next blog, I will discuss the third category type for succession planning which is the Family Business.

Here’s to your profitable Business Succession!

Leigh Riley

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Currently, I’m in Chicago USA attending the MBA style intensive exit planning study program for Small to Medium Enterprises.

I’ve had 3 days to adjust for jetlag and tonight I treated myself to the Broadway hit show – The Million Dollar Quartet.  This was not only a brilliant display of talent and showmanship, but also raised some interesting points relevant for business owners.  The story is told through the eyes of the Sam Phillips, owner and manager of the recording label “Sun Records”, that gave new talents their chance to make it in show business.  It’s been said that it takes talent to know talent, and that is what comes across loud and clear to me about Sam as I enjoyed the show.  Sam discovered the big names such as Elvis Presley, Johnnie Cash, Carl Perkins and Jerry Lee Lewis. Sam had the knack of understanding the wants of the teenage music market at the time, and hand picked the talent that would provide it.  The rest is history.  Despite Sam’s great ear for the up and coming sounds that would pay dividends for his company, he didn’t understand the need to protect his business what he had worked so hard in business to achieve.  He’d taken the risk with these young unknowns, and was so successful at promoting them, it attracted the intense interest of bigger players that enticed these young ambitious artists with lucrative contracts involving greater exposure and success for them.

Sam made some key business mistakes.

1. He had not conceptualised a continuity strategy that would protect his revenue streams.  When he lost his best artists, his business was virtually worthless.   

2. When the offer presented for him to merge with a larger competitor, his ego would not allow it, and hence he suffered financially… Sam didn’t know when to relinquish control for the greater good of him and his company.

3.  Sam did not know how necessary it was to grow his company along with his clients.  They outgrew his service offering and had no choice but to move on, despite them being very appreciative for all he’d done for them.  Not one of them made the decision to move very easily.

Sam was a great guy and a very talented one, but it takes more than this to succeed in business.

I have to ask you now, are you making some of Sam’s mistakes? Or have you implemented strategies to protect your business income?  Is your business developing in a manner that will retain your clients?

 Have you thought about your business exit strategy and is it prepared for all possibilities?

Without a plan to address these fundamental business attributes, it’s likely your business has no real value that can be sold, which is likely to impact your financial future.

 If you want to know what you can do to protect and grow your business value, start by reading the book, “Your Business Succession…proven strategies to boost business profits from start up to step down”  It’s all about how to enter, execute and exit from your business for maximum cash flow and profit.

You can also sign up for the Free Webinar on 21 June 2011 by emailing your interest to my office at support@ybsprofits.com    or   call 1300 499 225 to book your place.

The session will be run in two timeslots, 2pm and 7pm of 45 minutes duration.

Places are limited so don’t delay.

Here’s to your successful business exit strategy!

Leigh Riley

Succession Planning is relevant for every business owner because one day, you will either want to or have to, exit your business.

It is normal for you to hope to sell your business when you exit, and the chances are, you will need the sales proceeds to fund the next phase of your life, or to assist your family in maintaining their livelihood.

How this will occur will depend on the type of business you have. In my experience there are generally three main business categories, and each will require a different approach to their succession planning. This blog will be written in three parts to focus on each of the three main categories, with the first of these being

Category One: Sole Proprietor.

If you fit into the first category, you will have a business that relies on your sole capabilities. For example, if you are a consultant or independent professional (such as a lawyer, accountant, doctor, etc), your business is likely to be the mechanism to sell your expertise and generate your income.

In this situation, you are likely to have a client base that can be sold when the time comes to leave, however the business book alone may not generate the sort of financial outcome you had hoped for.  This could leave you short of cash to fund your retirement, or leave your family with a lowered living standard if you leave under stressed circumstances.

If you are to improve your financial prospects when you leave your business you will want to build an asset with a reliable recurring revenue stream that is not entirely reliant upon you (see the concept of building your
business to the “Three Dimensional Zone of Value” discussed in the book “Your Business Succession” because this will yield the most profitable outcome for you when you exit. 

If you aren’t sure how to achieve this, you may want to engage a business succession strategy team to assist you (book your free 15 minute consultation), so you can maximise the cash flow and profits you receive when you exit your business.

Building your business value, is only part of the succession plan you want to build, because you will also want to identify your successor to establish agreed terms that secure your position through both planned and unplanned circumstances. 

If you are to profit the way you had hoped, your successor will need time to  be introduced to your clients, staff, business processes, suppliers etc, so the earlier you can set up the arrangement, the better your outcome will be.  Successors who have been given time to establish relationships with these key areas of your business will usually be prepared to pay a higher price for your business because it is more likely the clients will stay on.

If you are not prepared to take the steps to build your business succession plan in this way, you will want to ensure you are building a nest-egg aside from your business to ensure you achieve the financial security you’d always wished for.  You may want to engage a financial planner to assist you in building an asset base away from your business.

Discover how prepared you are to exit from your business?

Take the FREE Business Exit Quiz to receive your customised report. It takes about 2-3 minutes to complete.

You can also Download three FREE chapters of the books.

If you haven’t engaged a Business Succession Strategy Team working together for your benefit it’s time to do so. Click here to Book your FREE 15 minute consultation with the Exit Experts Succession Strategist (only for subscribers of this blog, so please log on to subscribe)

In the next post, I will discuss the second category type for succession planning.

Here’s to your profitable Business Succession!

Leigh Riley

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Many of you who read this blog are rapidly approaching the time when you will leave your business due to your intention to soon retire.  There are others reading this blog even though you don’t plan to leave your business for some time,  but have realised your best chance of maximising the profits you will receive from your business when you do leave involves formulating your succession plan as early in the piece as possible.

It’s commendable that you are starting to think ahead by gathering information for your education in developing your succession plan, but I’m urging you to not let it stop there.  Keeping your succession plan in your mind is a wonderful thing, but it does nothing to make tangible the positive effects that will result when you’ve implemented all that you’ve thought so long and hard about.

Just last week I was speaking with a GP that had his own Practice established over 30 years with a very large patient base.  He had an outstanding business exit strategy for his succession plan and had proudly shared it with me in confidence.  The only trouble was, it was all in his mind, and he had not taken the necessary steps to formalise his succession strategy. 

It’s ironic to me that a doctor who deals with life affecting factors that impact his patients each day, had not considered for a moment that he could also be affected by health issues and impact his ability to implement his very solid plans for succession.

To say his situation was vulnerable would be dramatically understating the situation.  If you are a regular reader of my blog, you already know about the 6 Succession Triggers (Dispute, Divorce, Disability, Death, Desire for Difference, Departure due to Retirement), that can waylay the best intentions for a disasterous outcome, but if you need to remind yourself you can read the details in my book “Your Business Succession” How to Exit Your Business with Maximum Cash flow and Profits.   If you’re a medical practitioner, soon to be released is the book especially for doctors “Your Practice Succession: How to Leave a Legacy and Reap the Rewards of a Lifetime of Service to Your Community”

Recently we covered the importance of communicating your succession intentions in a blog with a case demonstrating what can happen if you don’t communicate and formalise your succession strategy.

Yes, taking action to educate yourself with the succession options and strategies that will ensure your success, is commendable, but you must also IMPLEMENT Your Business Exit Plan with a formalised strategy to ensure you are positioned to profit from your business through almost any circumstances.

Here’s to your Successful Exit Strategy!

Leigh Riley

Infighting and Disputes Devalue a Thriving Business

When you decide to join forces with colleagues in a business, your natural response is to focus on all the positives of the union.

The last thing you are likely to have on your mind is the possibility of an acrimonious separation that could result in you losing part or all of the capital you contributed to the business, as well as being denied the value that your efforts contributed.

Let’s face it – if you thought that was a possibility, you would never enter a joint venture, but the reality is that some business relationships do sour, and the worst time to attempt to negotiate fair exit terms is during a dispute.

CASE STUDY – Effects of infighting and disputes among business owners

The situational errors made by business partners Andy, Phyllis and Johanna in a professional services firm caused a tragic loss  of value due to infighting and disputes which resulted in one partner being forced out without her rightful financial entitlements.

A thriving professional services firm’s three partners began to argue among themselves about the business operations and workload. Two of the partners, Andy and Phyllis, felt they were working harder than the other, Johanna, although all were earning the same pay.

The arguments escalated into a dispute when Andy and Phyllis, who were romantically involved, ganged up on Johanna, leading to her unplanned, forced exit. With no formal agreement about succession terms in place, an unreasonable exit payment was offered to Johanna.

Johanna engaged legal representation and a costly legal battle ensued regarding equity value. The outcome was less-than-fair terms for the departing partner after costs. With all parties focused on the dispute, attention was diverted from the business operations. The result was a sizable decline in the practice value.

What’s more, during this disruptive period, some staff left, while others took advantage by slackening off. Many clients left the firm to engage alternative options due to the poor service they were receiving, some following departing staff members, effectively destroying the original value of the firm.

Cases like this demonstrate why you want to start your business relationships with the end in view, and why you must negotiate the exit terms while all partners are in a positive frame of mind.

Why Succession Solutions MUST Be Planned At The START of a Business Partnership

This situation could have been resolved easily had they started their partnership with a succession plan agreement. The conditions of the agreement would need to include the full financial terms applicable to any partner of the firm exiting under each of the possible succession triggers identified in Chapter 2 of the book, “Your Business Succession”. This would have allowed Johanna to decide whether or not the terms of exit suited her before she committed to entering the business. She would have had the ability to negotiate more favorable terms from the start, which would have saved her from the stress, legal battle and financial loss that eventuated.

You can read in detail the actual strategy outlined for the agreement in Part 5 of “Your Business Succession”.

How well prepared are you to exit your business with maximum cash flow and profit under any circumstance?

Take the FREE Business Exit Quiz and find out!

To Your Profitable Business Exit,
Leigh Riley

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Are Verbal Agreements in Business Succession Plans a Good Idea?

In business situations, verbal agreements about succession plans, or indeed any aspect of the business, are usually made because the people involved share a relationship of trust. Operating on verbal agreements appears to be quite acceptable among members of the extended family, with friends, or with partners, because there is the belief that the quality of the relationships will ensure that agreements will be honoured in the manner intended.

What happens to the verbal succession plan when things change?

However, the problem with verbal agreements in business is that circumstances can change – people’s recollections become distorted over time, and the resulting misunderstandings can cause not only relationship breakdown, but also breakdown of your business.

Case study – verbal agreements in a family succession plan leave the successors vulnerable

Sonya retired and handed over her farm business in equal shares to her two children, who had always worked hard on the property.

Sonya asked for no payment for the business, and the children agreed to pay a lease fee for use of the farmland to provide Sonya with the income she needed to fund her retirement.  They did not have a formalised lease and arranged the terms on a verbal agreement basis , which seemed fair to everyone at the time because of their family relationship.

When Sonya suffered a heart attack, she decided to liquidate her assets by selling the farmland. She felt entitled to do this because it was her property.

Verbal Agreements Can Lead to Relationship and Business Breakdown…

Unfortunately Sonya’s adult children could not afford to buy the land and the new owners plans for the land did not include allowing Sonya’s children to continue farming under a lease arrangement. This resulted in the children losing everything they had worked for – they were effectively out of business and even out of a job.

This sorry story is an excellent example of why verbal agreements are not suitable succession arrangements, even in loving or close families.

How to protect all members of your family in your succession plan

One straightforward succession solution to avoid this disaster would have been to arrange a written, formalised lease agreement between the family members so that the rights of all involved would be protected. The agreement could have been extended to allow the adult children first right to buy upon Sonya’s decision to dispose of the property.

Furthermore, funding could have been arranged with terms to arrange payment over time, or by using insurance to provide immediate funding upon certain events—such as a heart attack.

Discover more succession solutions

You can read the full details of suitable succession strategies for similar situations in Part 5 of my book “Your Business Succession: How To Exit Your Business With Maximum Cash Flow and Profits.”

To Your Profitable Business Exit,
Leigh Riley
Succession Solutions Specialist

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January is almost over and by now you have probably had enough time to think about what you plan to achieve for your business in 2011.

Historical example of a powerful family’s succession plan

If you’re anything like I am, you’ve mixed your business planning time in amongst some recreation time, and been to some movies.  If you haven’t seen it already, I can highly recommend you check out “The King’s Speech” starring Colin Firth and Geoffry Rush.  It’s an unbelievable, but true story of unexpected succession thrusting the stuttering, ill prepared Prince Albert to the forefront of the British Monarchy after his brother Edward VIII abdicated, having served less than 11 months as King.

Poor Albert was forced to assume the role of King George VI (they changed his name from Albert because it is a German name that was thought to be unpopular given the political rise of Hitler).  The underconfident Prince went into overdrive attempting to prepare himself for the business of being King of England and to fill the large shoes his father George V had once worn.  He had many fears to overcome, particularly with his speech delivery; and given his life long stuttering problem, he definitely didn’t feel up to the task.  But his royal duty was calling so he had little choice.  Undoubtedly it caused him a great deal of distress, but fortunately despite his lack of confidence, he did in fact have the qualities that enabled him to become the great King George VI.    The outcome could have been quite different had Albert not had the ability to rise to the occasion.

I have to wonder how many of you may be leaving yourselves open to potential failure due to a poor choice or no choice or strategy for your business succession.  Just how well prepared are your successors to fill your shoes should you suddenly leave your business.  What kind of solutions have you put in place to ensure the continuity of your business along with assuring your own financial success?  Will your legacy live on beyond your reign?

Even if you have your succession plan in place, how well prepared are you and your business to cope with the unexpected and unplanned events that may force a space at the helm of your business such as the one experienced by the royal family in this story during 1936?  Have you chosen your successor by virtue of a formula such as ‘leave it to the eldest child’ as is the practice of the British Royal family?  Or have you taken the time consider who may be best prepared to takeover for the better of the business?

Succession planning should position you and your family for the best financial outcome through any circumstances.

How prepared are you to exit your business with maximum cash flow and profit?

You can learn a lot more about the essential attributes of a successful succession plan in my book “Your Business Succession“.  But before you invest in your business future, you may like to assess just how well positioned you are by taking the FREE customised assessment I’ve designed especially for you to determine how well prepared you are to exit your business.  Simply go to www.BusinessExitQuiz.com The quiz takes about 3 minutes to complete and then I will provide you with feedback about the areas you need to focus on to ensure your most profitable outcome when you leave your business.

If you would like to know more, you can email me your questions or be brave and call me direct … I’ m expecting your call on 1300 499 225.

Here’s to your Profitable Business Succession!
Leigh Riley

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Many people believe that they will decide when they will leave their business, yet the statistics show that 51% will leave prior to the time intended for various reasons.  If 2011 is the year you believe you would like to leave, you will need to think about how you can realise the financial rewards from a lifetime of effort.  There are a few things you can do to ensure you maximise your outcome to a smooth succession and here are my top tips for you to follow:

1. As early on as possible, you should be planning your exit and eventual sale, so get your business in order! 
 You need to build a safety net that will guarantee you a price for your efforts.  When you sell a house, you present it in the best way that you can to attract buyers and maximum price.  Selling your business is the same. 
 Make your business something that someone will want to buy.  Understanding that buyers want a business with good  systems and customer management processes, market penetration, business cashflow with profitability, and well trained people so that the business does not depend upon you to operate it. 
 
Engage a Business Coach to sharpen up your business edge in the same way you would engage a tradesman to fix up  the loose ends around the house or a personal gym trainer to help you shed some of those extra pounds. 

2. Remember it’s not what you sell your business for that will count, it is the amount you receive after tax that will  provide you with the most favourable outcome, so solid prior tax planning is essential from professionals that understand the impact of succession. 

Seek advice from Succession Planning Specialists who are working as a team. You don’t go to a general practitioner if you need an orthopaedic specialist and the same goes for business matters that need special treatment.  
To put yourself in position for the best financial outcome, you will need a team of Specialists from accounting, legal, risk management, and business broker willing to work in concert to devise your position of strength when cashing in on years of effort in the most tax effective manner.  They can also approach potential suitable buyers on your behalf when discretion is necessary due to potential market impact that may be caused by an impending sale.
3. Determine who the potential buyers may be as this may impact the method used in the changeover.  You may need to think outside the square when an immediate buyer does not come to mind.  If you are fortunate, a fellow proprietor may be the prime candidate if you are in a co-owned business.  If you are a sole proprietor, you may have staff or a friendly competitor who maybe a likely candidate to buy you out. The suitable candidate and their ability to pay for your business will impact the method for changeover.

4. Decide how the new proprietors will fund the buyout and on what terms. If you’ve been in business for a while, the chances are that your business has grown significantly in value.  Funding your purchase price may need some time and thought to ensure a prospective sale proceeds smoothly, enabling you to realise all of your hard earned equity in cash.  It may be useful to implement a key staff reward system whereby shares in the business rather than cash bonuses paid over time can help to facilitate the buy-in.

5. Deal with liabilities and personal guarantees related to the business as early on as possible, as these do not
 retire nor die with you.  Your succession plan must extend to adequately alleviate you of these responsibilities.

6. You may not be able to leave the business when you choose, so it is essential to include planning for contingencies.   Unexpected exits such as poor health, disputes, divorce or death can leave you in a weakened position. 
 

Your succession plan should provide you and your family with a pre-arranged price with tax effective terms and insurance to ensure adequate funding at your price.

You can find a lot more detail about the essential points made here in the book “Your Business Succession”.  For your FREE customised assessment to determine how well prepared you are to exit your business, go to the Business Exit Quiz. It takes about 3 minutes to complete and provide you with details of the areas you need to focus on to ensure the most profitable outcome for you when you leave your business.

Here’s to your Profitable Business Succession and your prosperity for 2011!

Best wishes

Leigh Riley

How your family’s health can impact on your business exit profits…

In this series, I am revealing 6 of the Situational Errors that can prevent your business from capitalising when you exit your business at any stage, particularly when the exit is beyond your control. My previous post revealed the first of these situations, where Brian, the owner of a Mechanic workshop, had made an error in judgement about succession planning.  He did not see the need to implement a business exit strategy because retirement seemed a long way off at his age. Unfortunately he developed a severe illness which forced him to exit his business at a very young age, causing financial hardship for his family and job loss to his employee.

In this post I’m going to insist that you don’t limit your thinking to how your own health can impact the continued viability of your business, because this would also be an error of judgement. In my book “Your Business Succession” Case Study # 8 discloses how Judy’s profitable, home based clothing manufacturing business was forced to a grinding halt because her child was diagnosed with leukemia and in need of constant, ongoing care.

How prepared is your business to enable you to care for a sick child?

Judy had some very capable employees, but none were driven or talented enough to run the business without her leadership.

The smaller your business, the more vulnerable it can be if you have to exit early

The smaller your business, the more vulnerable it can be, so structuring your business with an exit strategy for diverse situations is essential if you want to maintain financial viability in the face of the unexpected.  Now you have read about two situations where the business owners thought succession planning was only for people about to retire.  Each had no way of knowing they would soon be forced from their business well before retirement age due to situations beyond their control.   Don’t leave your business exit strategy to chance. Make sure you’re in a position to profit – no matter what the situation!

Business succession solutions

Succession solutions exist for all business ownership structures.  A typical small business exit strategy involves arranging a formal Buy-sell agreement with another interested party. This could be with an employee or a colleague already operating in your industry.

For dozens of tips and detailed case studies to kick start your successful business exit strategy  and invest in your future you want to read the book “Your Business Succession…how to enter, exit and execute your business for maximum cash flow and profit”.  If you don’t find a solution to help you with your business exit plan, I will happily refund the purchase price!

How well prepared are you to exit your business with maximum cash flow and profit?

Take the FREE Business Exit Quiz, and receive your own customised report which will reveal the strengths of your business exit plan and uncover any shortcoming that you must address if you want to maximise your profitable outcome from your business when you exit  – through any circumstances.

Here’s to your profitable business exit!
Leigh Riley

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Situational Errors That Prevent Your Exit With Maximum Cash Flow and Profit…

Yesterday I was speaking with a very experienced business motivator about Business Succession Planning.  I was very surprised to learn that she believed Succession Planning was something a business owner would only consider if they were thinking about retiring soon.  I was very quick to point out several reasons, many of them unplanned, that someone would exit from their business (see some of these in earlier blog posts).

51%  of business owners exit their business before to retirement age

You may be just as surprised as she was to learn that 51%  of business owners will exit from their business prior to retirement age, with a large number of exits being due to factors beyond their control, or that they would not have considered possible.

My previous series revealed 8  Business Succession Strategy Weaknesses that prevented business owners from exiting with maximised financial benefits and outcome.  In this series, I’ll identify 6 Situational Errors that prevent business owners from capitalising when they exit their business, particularly when their departure is beyond their control.

Most business owners I’ve met are naturally quite driven and vibrant and it seems almost inconceivable that anything could happen to prevent them from achieving or maintaining their success in business. However, illness can be a major unplanned factor forcing a business owner to leave prematurely. Failing to recognise this is a situational error of judgement that can lead to an unfortunate financial outcome for you as the business owner, your family, customers, employees and suppliers.

Case Study #7 – The Impact of Unexpected Illness On A Small Business Owner and His Family

In my book “Your Business Succession” in Case Study #7 I refer to sole trader Brian, who operated a Mechanic Workshop from leased premises with one apprentice.  Brian earned a very good income that supported his wife, Sue and two children. However when he was unexpectedly diagnosed with a brain tumour at age 38,  his ability to function was swiftly impaired, impacting the viability of his business.

Brian’s apprentice was not skilled enough to continue operating the business without him.  His wife had very little understanding of how to run a business and wasn’t confident enough to supervise someone else to run it either.  On top of that, the business was not generating enough revenue to pay someone to manage it as well as pay Brian’s family the income which they had built their lifestyle.

Impact on Brian’s family and employee

Sue’s distress was two-fold; first due to the potential loss of her husband to their family, as Brian had only a small chance for survival , and second, due to financial hardship that meant their lifestyle was suddenly very stretched.  Sue could not seem to find a buyer for the business due to the transactional nature of it and the reliance on Brian to operate it.   She was forced to terminate the apprentice (whom she could no longer pay), wind up the lease (which cost money to do) and commence liquidation of the business assets (which were sold under fire-sale conditions as she needed money fast).

The financial outcome for Brian’s family could have been quite different had he sought professional exit strategy advice and implemented some simple key strategies.  Until that unfortunate situation arose Brian also had believed that Business Succession Planning was only for people who were about to retire.

Possible exit strategies Brian could have used

One possible exit strategy for Brian could have been to use a Buy-sell Agreement with a pre-agreed sale price based on the valuation of his business.  This would involve a legal agreement with a competitor, friend or colleague working in the industry to ensure there would be an automatic buyer for the business if it needed to be sold.  A simple life policy could have assisted with the financial burden and could also have been used to fund the buy-out in the Buy-sell agreement.

Mitigating the financial loss made in the face of illness was possible even though Brian operated as a sole trader. A Business Exit Plan would have ensured continuity of his business, with continued financial viability for his family, and maintained a job for his apprentice.

Small businesses can be most vulnerable to unplanned exits

The smaller your business, the more vulnerable it can be, so structuring your business with an exit strategy for diverse situations is essential if you want to maintain secured financial viability.  Brian had no way of knowing he would soon be forced from his business due to illness, or that he would exit well before the anticipated retirement age.

How to avoid situational errors of judgement

Don’t leave your business exit strategy to chance.  Make sure you’re in a position to profit no matter what the situation.  Ignoring this situation is to gamble with your future in a manner that could adversely affect you, your family, your employees, the viability of your business, your social standing in the community and your trading partners and suppliers.

Plan the right succession solution for your business ownership structure. One business exit strategy may be to arrange a formal buy-sell agreement with another interested party. It could be arranged with an employee or a colleague already operating in your industry. For your successful business exit strategy, take a look in the book “Your Business Succession…how to enter, exit and execute your business for maximum cash flow and profit” where you will find dozens of options to help you design the best business succession strategy for your profitable exit.

How well organised is your business exit strategy?

Take the FREE Business Exit Quiz, and get your own customised report which will reveal the strengths of your business exit plan and uncover any shortcomings that you must to address if you want to maximise your profitable outcome from your business when you exit through any circumstances.

Here’s to your profitable business exit!
Leigh Riley

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