The first day you’re in business and today are the two best times to blueprint your exit strategy. It’s the one inevitable reality every business shares, and the easiest to forget about when you’re in the thick of the day-to-day grind of owning a business.
In order to maximize your return on investment from your business, you need to have a solid exit strategy and stick to it. Below are some tips to help you identify and solidify your strategy.
- Determine How To Bow Out
Are you going to shut it down, drain your business, or sell it? Answering this question is the foundational element to your exit strategy.
Shutting down your business is by far the easiest of the three, but it also means sacrificing potential revenue from a sale. If you’re brand has value and you have a loyal customer base, it’s best to try to avoid this option if possible.
Draining the business of cash annually can help you recoup your investment capital, but can hamper your ability to run the business in the short-term. Be sure to consult your financial manager or tax professional to see how this option can impact your taxes.
Selling your business is by far the best option overall, but is also the most time consuming. You can be stuck waiting years for a buyer, forcing you to reconsider the other two options. However, patience oftentimes pays off in the form of a significant revenue payout after the business sells.
- Replace Your Best Assets
Let’s say Restaurant A is owned by its star chef, and managed by the chef’s wife. It’s been in business for decades and has become a neighborhood landmark, amassing a loyal, profitable customer base along the way. Now, the chef and his wife want to bow out. How should they exit?
In instances like this one, it’s often best to train a few assistants to run the business. The chef could train a couple of his assistant chefs on his secret recipes and techniques to maintain the quality of the food. In the same vein, the manager can hire and train a couple of employees to run the front of house in the same way that she did. This way, the husband and wife duo can step back and not damage the business.
- Ensure Maximum Valuation
One of the worst mistakes a restaurant owner can make is to abruptly exit from their business. You can make your restaurant very valuable to potential buyers by implementing a few simple changes before you exit.
First, clean up your books by conducting a monthly financial audit. More importantly, implement your auditor’s recommendations. There is nothing more disparaging to a potential buyer than investing in a business with troubled financials.
Second, get your inventory under control. Make sure you have a documented inventory control process that can be passed on to a future buyer.
Third, designate a competent leader that can lead your business into the future. Most buyers don’t want to take the time to build their own management team. So, if you can offer a buyer a business with solid leadership, you’re product becomes much more attractive and can reap a much higher valuation.