What should I include in my exit plan?

This is a question I get asked quite frequently in my line of work. What should I include in my exit plan?

Although all businesses are different - they’re structured in different ways, operate in different industries, have different internal rules and procedures – the process of exiting a business, and the principles behind each stage of the process, remain largely the same.

This process is as follows:

1. Reach agreements and seek authorisation from other directors/partners to sell the company. This agreement should include the signatures of all parties involved, and should be checked over by a solicitor to ensure it stand up to legal scrutiny if any of the directors/partners decides they no longer want to sell the business and wish to oppose the decision.

2. Designate a leader and arrange a team for the selling process. If your company is only small, the team may only consist of you (the director/owner) and another director or partner. If the organisation is larger than this, it should include business executives, accountants, and legal personnel, all of whom should bring a different area of expertise and experience to the team.

3. Employ help in the form of consultants and other professionals. If you want your business exit to be a successful one, it would be a wise choice to employ the help of an exit strategy specialist – preferably one who is experienced in the type of exit you are considering.

4. Conduct a thorough review of the business and identify any problem areas. Reduce costs and boost revenue wherever possible to improve the financial attractiveness of the business.

5. Develop a list of assets and perform a physical inventory. From this you can create tax calculations and establish the value of your business.

6. Value the business. This is probably the most difficult step in the process: determining the value of your business. Because all businesses operate differently and are structured in several ways, there is no universal way to determine the value of your company. Employ the assistance of the aforementioned consultants and professionals at this point to ensure you value it properly.

7. Prepare a detailed plan of how you expect to exit the company. Include a timeline of events.

8. Announce the decision. Let clients, employees, and all other stakeholders in the business know about your decision to sell or otherwise exit from the company.

9. Implement the plan.

10. Conclude or transfer contractual obligations. Agreements with suppliers and other stakeholders need to be terminated or otherwise transferred in some manner.

11. Close operations. Be careful not to do this too early as it can affect cash flow and net value dramatically.

12. Settle debt obligations and transfer/sell business assets.

13. Prepare final financial statements and tax returns. This is important for placing closure on your legal tax obligations before you leave the company.

14. Receive tax clearance notice. Once this is received, it should be stored, along with other business records (for a minimum of seven years). You should now close your bank account.

So where does EASF Ltd. come in to this process?

We are the consultants that step three mentions. We help you value your business and guide you through the entire exit process to ensure that no important steps are missed and that you maximise the value of your business upon the point of exit.

To speak to the professionals at EASF Ltd., give me, Bob Brown, a call on 01709 810081 or email me at bb@easf.co.uk.