What Do You Think About When On Holiday?
- Christmas season food and drinks?
- Family and friends?
- Golf, cricket, football or some other sport?
- Sunning yourself on the beach?
- Camping in the bush?
For some business owners the holiday season is a valuable time to relax, unwind, de-stress and recharge the batteries.
But ironically, as you relax, the mind plays tricks on you – it gets creative, big-picture style, or perhaps you just see things from a different perspective. Or all of that and more. It is often at these points that business owners think of new ideas or strategies.
And in some cases they decide they want to sell the business so they can enjoy more of the relaxation that gave them this insight.
But making a decision on what to do with your business based on maximising your suntan or minimising your golf handicap is not necessarily going to result in the best decision. The desired outcome may be the same – but the implementation plans may need to be different.
Usually there are four key questions to answer when considering an exit strategy or succession plan for your business:
- What is the value of the business now?
- Is the business really prepared for a new owner?
- What is the best exit strategy, given the current value of the business?
- How can the value of the business be increased and what resources would it take?
In many cases a business owner will have part of the information to answer these questions. They will be aware of the profits, the cash balance and the issues associated with growth and improving performance. They may have even been approached by a buyer and have some sort of price in their head.
What they won’t have is an external perspective on both the historical trends and how the future opportunities will impact a business valuation. They will often lack a structured view on what influences the value and how changes in cash flow will impact a business valuation.
And in many cases they will not have considered the different methods of selling a business:
- Do you sell outright or in stages?
- Are you selling shares or the assets and goodwill?
- Can you sell to colleagues, employees or family?
- Is it a public trade sale or a managed process of seeking expressions of interest?
- Would a merger with a related business give a better outcome?
It is not that you need a complete and detailed succession plan or exit strategy document – but you do need reliable information that you can consider, as you enjoy that quiet day by the pool or relax in the shade of gum trees by the river.
If you take a holiday having already researched these questions and armed yourself with the right information, your ideas and strategies that you think of will be more clear and often have greater impact than if you leave your thoughts and the information you need to chance.