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Do you want to leave your business on YOUR terms?

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Do you want to leave your business on YOUR terms?

By , January 31, 2024
taking control

In the world of business, the decision to exit is a pivotal moment that can either be a triumph or a tumultuous experience. Recently, I had a conversation with a business owner that sparked a crucial question: “If someone makes an offer on my business and I accept it, is that leaving on my terms?” The answer, as I explained, is a bit more nuanced than a simple acceptance of an offer. Leaving on your terms involves meticulous planning, strategic readiness, and maintaining control throughout the entire process.

The Pitfalls of Reactive Decision-Making

When an unexpected offer comes knocking, it often carries assumptions and conditions that may not align with the true state of your business. Reactive decision-making in such situations can lead to a lack of competitive tension among potential buyers, leaving you vulnerable to unfavorable terms. The due diligence process becomes a distraction, diverting your attention from driving the business forward and potentially resulting in a reduced offer. This unfortunate scenario can leave business owners feeling disgruntled and bitter.

The Importance of Proactive Planning

To truly leave on your terms, a proactive approach is key. This involves making your business “exitable” – a term I’ve coined to signify being prepared and ready for the exit process. Essential elements include shareholder agreements, well-structured corporate governance, clean financial records, and efficient systems. Viewing your business through an investor lens helps identify potential risks and highlights areas for improvement.

Leaving on Your Terms

A successful exit is one where the buyer finds the business to be as presented, with minimal reliance on the owners for day-to-day operations. This ensures that the final price closely aligns with the original offer, creating a sense of fairness and satisfaction on both sides. Swift and smooth transactions occur when everything is in place as expected.

The Risk of an Earn-Out Period

In contrast, when the business doesn’t meet the buyer’s expectations, owners may find themselves obligated to stay on as employees during an ‘earn-out’ period. The success of this period is tied to the achievement of revenue targets, and leaving prematurely can result in financial loss. Many individuals find it challenging to adapt to new ownership arrangements, leaving them dissatisfied.

Strategic Planning for a Smooth Exit

To guarantee a smooth exit, strategic planning should commence at least three years in advance. Succession readiness ensures that your business is well-prepared, reducing the likelihood of unpleasant surprises during the exit process. As part of this preparation, understanding your business’s value through a reliable valuation tool can provide a realistic starting point for negotiations.

Leaving your business on your terms is not just about accepting an offer but about being in control throughout the entire process. A well-prepared, exitable business minimises risks, facilitates fair deals, and allows for a smooth transition. Don’t wait for an offer to dictate your business’s fate – take charge, plan ahead, and ensure that your exit is on YOUR terms.

Darryl Bates-Brownsword

Darryl Bates-Brownsword

CEO | Succession Plus UK

Darryl is a dynamic, driven Business Mentor and Coach with over 20 years of experience and passion for creating successful outcomes for founder-led businesses. He is a great connector, team builder, problem solver, and inspirer – showing the way through complexity to simplicity.

He has built 2 international multi-million turnover businesses; one now operating in 16 countries. His quick and analytical approach cuts through to the core issues quickly and identifying the context. He challenges the status quo and gets consistent, repeatable and reliable business results.

Originating in Australia, Darryl’s first career was as an Engineer in the Power Industry. Building businesses bought him to the UK in 2003 where he quickly developed a reputation for combining systems thinking with great creativity to get results in challenging situations.

A keen competitive cyclist, he also has a B Eng (Mech) Engineering and an MBA.