Designing your exit plan
What are you going to do with the business?
This may be as short and sweet as ‘I’m closing it’ or ‘I’m selling it’ but either way you must make sure you know exactly what is going to happen once you are gone.
When exiting a position, there are a number of different options open to you.
This may include:
Trade Sale: This is the most commonly used business exit route in both Europe and the US and normally provides a good financial return for the seller. When looking to sell your business it is advisable that you identify a number of possible buyers who may benefit from buying your business.
These could include:
- A family member of close friend
- Approach your competition – buying out a competitor may interest them
Also look in local and national business newspapers and magazines to see if anyone is looking fro a business in your particular sector. Make the most of the internet: join sites that allow you to sell businesses, but always make sure you follow their safety guidelines.
Management Buy-Out (MBO): If your business has more than one manager then this may be an exiting option for you. The other managers will literally buy out your portion of the company.
Reasons for undertaking a management buy out may included:
- Not having to shut the company down completely
- Not sacking managers of staff – if someone else took over the company, they may want to bring in their own staff
- Allowing one of the managers to go in a different direction without affecting the company too much
If a management buy out sounds like an option for you then make sure you do the following:
- Talk to the other managers about the process and how to go about it
- Allow the managers enough time to raise the capital to buy you out. Approaching them at the last minute will only lead to bad feelings and they may not have the money to buy you out
- If needs be, train your staff and management team – it is not fair to leave a company without providing them with the skills in order to carry on trading
Management Buy-In (MBI): This involves an external management party buying into the business.
A MBI normally occurs if:
- The business is underperforming
- Additional management would bring in new skills and management input
- The MBI team have particular skills in the market of the business
As a general rule, management buy-ins are more difficult to undertake than management buy-outs. This is because financial lenders and other managers of the company need to be convinced that the MBI candidate has enough experience and capital to invest themselves into the company.
A successful MBI candidate may have the following attributes:
- A strong background in the chosen sector
- The drive and commitment to lead the business forward
- Enough capital to invest into the business
