Whether your business is a start-up or a mature business, exit planning should be part of your overall business plan. That may sound counterintuitive, but the fact is that no one knows when they may have to leave their business.
Not including an exit strategy in your business plan is understandable when your focus is on growing your business. But exit strategies not only protect against unforeseen events, such as the sudden illness of a company leader, but also provide a clear succession strategy.
Building the elements of an exit strategy into your business strategy makes good business sense because it enables you to prepare for most contingencies.
Following are some practical considerations:
- Recordkeeping. All tax and accounting records must be well-maintained and up to date. Have at least two years of records ready to be reviewed.
- Company manuals. Keep written documents that memorialize all of the processes and procedures at your company. These manuals should include your company’s human resources policies and procedures as well as job descriptions for all employees.
- Cybersecurity. Cybersecurity is a high priority for all businesses. Investing in protecting your business from hackers is critical. Implementing internal controls like requiring dual authorization and regular password changes will help protect your company’s digital assets
- Intellectual property (IP). Acquiring, protecting and managing items like proprietary software, licensing and other agreements is important. Failure to do so may affect your ability to transfer your company’s IP to a buyer.
- Compliance with laws and regulations. The most important thing you can do to ensure ongoing compliance with the laws and regulations affecting your business is to put a monitoring system in place that alerts you to due dates and deadlines. Your business will run more smoothly as a result.
- Elevator speech. Have an elevator speech ready so you can easily talk about what makes your company great. What makes it different than its competitors? What makes it more valuable?
- Strategic outlook. What needs to be fixed? What can you do to make your business better? If you’re a start-up, think about what would make your business more attractive to investors. If you’re a mature business, focus on increasing the business’s value.
- Sound advice. Don’t be afraid to ask for an outside opinion. Sometimes it takes an objective analysis to see what’s in front of you.
Having a well-planned exit strategy from the start of your business can ensure your success by keeping your company on track. Keep in mind that sometimes your exit from the business will be triggered by something outside of your control. The objective is always keeping your business ready for the unexpected. In that sense, having an exit strategy is an extension of running a well-managed business.
Ready to sell your business? Contact the attorneys at Rochford Langins Jarstad today at 507-534-3119.