Empower Your Business

Accounting is Just the Beginning

By

When is The Right Time to Exit Your Business?

Exit strategy

Businesses often start with an idea, a limited amount of capital and loads of enthusiasm.  Through careful planning and investment they grow and develop eventually becoming worth far more than they originally were. However, a lot of owners make the wrong exit decision and pay a price for it.

A relatively small number of businesses continue through multiple generations. The majority (as high as 67%) either fail or are sold by the original owners.

Timing your exit is about understanding:

  • The best time to realise that value.
  • Whether your business has outgrown you.
  • Whether the business model is changing (for the worse).
  • Whether you have outgrown the business.

Ideally you want to exit your business before its value has peaked.  A strong business with a good number of prospects is always going to be easier to sell. Buyers are likely to pay a premium for their expectation of the future value to be created.  Smart owners monitor not only the value of their business but also the expectations for the future. It’s important to know where you sit on the value curve.

Organisations can also outgrow their owners, directors, trustees or committee members. Some people are great at getting things up and running from an idea (the entrepreneurs) whereas others are great implementers and excellent at growing a sustainable business or organisation.

Success at one level is not an automatic guarantee of success at the next. Each level requires distinct and very different skill sets. The smaller the organisation the more important it normally is for you to be skilled at what the organisation does.  The larger the organisation the more important it is that you are a good manager – strong in finance, strategy and business planning.

If your business is outgrowing you then it may be time to exit before the next stage of growth puts pressure on both you and the business. This is why you see so many “founders” moving on to let the next wave of people through so that the organisation can realise its potential.

Don’t believe that your business model will be forever constant. Business models must change to survive. It seems no matter where we look we are reminded how challenging the last few years have been, here in New Zealand and also globally. However, challenges spark change, which in turn ignites reinvention and new beginnings. It’s a choice that opens new doors, offers the promise of new opportunities and increases our chances of success.

This change can be driven by the owners or it may be driven by changes in the industry (technology comes to mind) or emergence of alternate models to what have evolved, but for most people the danger is that their business or organisation model is changing and they do not realise it.

And in the same way that your business can outgrow you, you may be outgrowing it. This does not apply to everyone, but some business owners lose their enthusiasm once the business has grown to a certain stage – and a loss of enthusiasm translates into a dilution in business value. Where they relished the challenge of growing the business, they may become bored with the sameness of a mature model. This is when ‘fresh blood’ needs to introduced to ensure on-going success.

If you need help exiting your business contact Nick on 0800 ASK NICK or email nick@abac.co.nz.