Exit strategizing, also known as a Succession Plan or even a Succession Strategy, is one of the most important aspects of business–it’s also one of the most overlooked. The simple difference between a succession plan and a succession strategy is the length of time before trying to implement it.
A succession plan tends to be short-term or more immediately executed, whereas a succession strategy is often worked on over many years. Most business owners only consider an exit strategy or succession plan when they’re ready to retire or sell their businesses. However, there are many reasons you might need a succession plan or succession strategy, even if you plan to continue running your business for years.
Here’s your guide to business exit strategy and what you need to know. Afterward, if you have any questions about planning your strategy, contact our team at Bridgemark Strategies for a confidential no-obligation consultation.
What’s a Business Exit Strategy?
An exit strategy is how you plan to sell or leave your business. This plan often includes details that cover:
- When you plan on retiring
- How you want to retire
- Who will buy your business
- How financing will work
- What will happen to the company after you leave
Exit strategizing is important for all companies, regardless of size or industry. No matter what your long-term plans are, it’s always wise to consider what you will do when it’s time to sell your business.
Having a detailed strategy helps ensure that you get the most value for your business. It also gives you more confidence that business will continue to run smoothly and that employees and clients will be taken care of in the future.
Common Exit Strategies
When looking for a successor, you have a few options. Here are a few common plans.
1. Selling to a Family Member or Friend
Selling your business to a family member or friend is often the most simple exit strategy. Typically, this option has fewer formalities and negotiations. With that said, it’s important that you feel confident that the person you choose is qualified and capable of successfully running your business.
2. Selling to an Employee
If a key employee is interested in buying your business, selling it to them can be a fantastic choice! Since you are already familiar with your employee’s work style, this option can give you confidence that your company will continue to thrive in good hands.
3. Selling to a Third Party
Selling to a third party can be a great option if you are looking for the highest possible price for your business, and if another company is willing to acquire your business, you’ll have the opportunity to negotiate the price. You also have the opportunity to ask for a continued role in the organization.
Choosing the Right Strategy for Your Business
The best strategy for your business depends on your specific goals and objectives. When developing a succession strategy, consider the following:
1. The Value of Your Business
The true value of your business will determine how much cash you can realistically expect from the sale. This calculation is often complicated, so it’s best to consult an expert.
2. Firm Level Details
Details about your firm can dramatically impact your succession strategy. To get started, take note of the following:
- What is your product mix?
- How many clients do you have?
- How do you service clients?
- How many employees do you have?
You can always change these answers at a later time to maximize the value of your firm.
3. Your Timeline
Whether you’re planning on exiting your business in 18 months or the next five years, it’s important to work with an experienced consultant. It’s best to start planning this immediately so that your consultant can provide you with a realistic timeline for selling your business and achieving your desired outcome. Your desired outcome paired with the stage that your business is currently in will be two of the biggest factors in determining your timeline.
Make a Plan with Bridgemark Strategies
We hope you found this guide to business exit strategies helpful. As you can tell, planning the best strategy for your business comes down to creating an individualized plan. There is no one-size-fits-all, and that’s where Bridgemark Strategies can help.
At Bridgemark Strategies, we specialize in consulting with financial advisors on their exit strategies. We’ll work with you to understand your definitive goals and objectives and develop a customized plan to help you achieve the best possible results. If you’re ready to start planning for retirement, contact us today to schedule a free, no-obligation consultation. We look forward to helping you plan for this next exciting chapter in life!