By Zilla Efrat 

You’ve spent a lot of time building up your business, so you’d want to maximise its value when you leave it. That’s why having an exit strategy is crucial for any small business owner. 

It also helps ensure you leave the business on your own terms at a time that suits you and that the business can continue without you as the owner. 

But before you start, you need to know where you want to end up. How do you expect to exit the business? Will you sell it to another party, shut it down or pass it on to a family member? Will you exit it immediately or transition out of it? And why are you selling it? To boost your wealth, change careers or for lifestyle reasons? 

Once you know your destination, you can start preparing a map of how to get there. 

Understanding your potential buyers

If you want to sell the business, it’s important to assess who is likely to buy it –for example, someone with cash looking for a career change, an investor or a competitor that wants your location, customers, intellectual property or cross-selling opportunities. 

Could you explore a merger with another business or would your managers or staff buy you out? 

Understanding the potential buyers’ needs will guide in how you prepare the business to look the most attractive to them at the time of sale. 

Accentuate the positives

To boost your selling price, you will need to work on increasing the profitability of the business.  

This means finding the strengths of your business and then growing them. It also means improving aspects such as the management team, operational processes and brand. Reducing costs, making use of new technology and enhancing your customer service are other tactics that might help. 

Also, look at what your competitors are doing and how you can match or beat them. 

Lose the negatives

To enhance the attractiveness of your business, consider if you need to remove any factors that could put buyers off.  

One of these is key person risk – the risk that the business is largely dependent on your knowledge and skills, or that you are the face of the business. 

Ways to reduce this risk are to document all processes and procedures so that others can step in and follow them. You could also start delegating more of your tasks to others in the business and investing time and resources in training staff or potential successors. And, if your brand or business name is tied to you, it may be necessary to rebrand. 

It’s also important to keep accurate accounting records. Buyers usually want to see at least two years of accounting and financial records. They will be looking for stable growth and profitability and will not be encouraged by a lot of volatility in your financial performance. 

Your level of debt and how your financing is structured could also leave them unimpressed.  

You will need to consider whether you will pay off the debt from the proceeds of a sale or if the debt will be taken over by the buyer. Whatever the case, working on reducing your debt will pay off.