Something that is often overlooked, especially in the early stages of your business is developing a plan for exiting the business.
There are a wide variety of reasons that might lead you to start a business and exit plans are often just a varied. You might want to sell your business, pass it on to future generations (either family or key staff) or simply close down. It’s always worth asking yourself the question “what is the end goal?”
There is no right or wrong way to exit but it is an important element of planning in all of them. Some key points are:
If you are selling…
- It needs to be able to operate without you, therefore you may need to put in place procedures and systems
- Handover of key relationships
- Determine who is most likely to buy your business and develop a plan to market to them
- Ensure financials are regularly updated and you have considered appropriate methods for selling the business assets. Will you sell your shares or sell the goodwill and equipment?
- Timing is important
If you are passing to future generations…
- Handover of key relationships, this may take months or even years
- Do you have an appropriate business structure in place. Again are you passing on the shares or transferring the goodwill and equipment?
- Will you be around to support the new owners?
- How will they finance the acquisition from you? Will they need vendor finance?
If you are closing the business…
- Are there any staff entitlements to be paid? e.g. Annual Leave, Long Service Leave.
- Have you met all your legal obligations? Is there a likelihood of a future claim against you?
- Timing is important
It’s a good idea to contact your accountant when planning your exit strategy as well as executing it.
by Scott Sharp
Scott is a Senior Accountant at Insight Accounting advice. He has a Bachelor of Commerce and is a registered tax agent. Scott’s experience covers all facets of accounting but he specialises in small businesses and SMSFs.
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The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.