Consider your exit strategy when starting up
Here's how I planned an exit strategy
Simon Dunn set up Product Chain, a manufacturers' agent that builds brands for fast-moving consumer goods and sells the products on to retail clients, in 1988. He's building a five-year exit strategy and plans to sell the business to members of his team. Here's how he is putting everything into place.
What I did
Assess the options
"I'm 52 now and want to exit by the time I'm 57 or 58, maybe retaining some part-time role for a couple of years afterwards. I've looked at all the options and selling to key management seems to be the best choice.
"A trade sale doesn't really appeal as we're doing something quite specialist and there isn't an obvious buyer. I thought about bringing in family, but I'm not that keen and neither are they.
"I also looked at floating the company on the Alternative Investment Market (AIM) - the AIM is a market for smaller companies to issue and trade shares on the London Stock Exchange - but estimated that it would cost around £300,000 and that cash is much better retained on our balance sheet."
Get the right people into place
"Our sales director, Charles Foden, has been with the business for 12 years and I believe he should inherit the benefits of what we've all done together to drive the business forward. He's highly professional, has a BSc and an MBA and already owns 10 per cent of the business.
"We spend an increasing amount of time together now, so he can see the world as a business owner. We've also brought in an experienced financial manager to sharpen up our finances and smooth the path for Charles. We've already started discussions about how we can handle the process in the most tax-efficient way."
Sharpen the business
"We're getting more organised - for example, we've bought the freehold of our premises. We've also been consistently retaining profit in the business and strengthening the balance sheet. This is essential to create the value that the business deserves. The management team are talking regularly and more formally about succession.
"We're looking at where we expect the business to be in five years' time, the kind of people we want to bring in and what we want them to achieve. When the day comes, Charles may want staff to buy into the business too - it's too early to be definite, but it's certainly something in both our minds."
What I'd do differently
Not take on a partner
"Having a partner in the business held me back for more than 10 years. I believe we could have taken the business even further in that time if we weren't dealing with personality issues and different ideas about how to develop the business. Plus it took a lot of money to dismantle that could have been retained in the business to boost its value."
Subjects covered in this guide
- Introduction
- Why you need an exit strategy
- What do you want from your business?
- Decisions that could affect your eventual exit
- Exit option: family succession
- Exit option: selling your business
- Exit option: float your business
- Exit option: close your business
- The exit process
- Here's how I planned an exit strategy
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Simon DunnProduct Chain - Opens in a new window
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