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Erica Gilson
Chief Operating Officer
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What Are The Key Elements Of An Exit Strategy?

True North Mergers & Acquisitions

September 20, 2023

You poured your heart, soul, and countless hours into building your business from the ground up. Now, it’s time to think about making an exit strategy. Whether it’s retirement, fresh challenges, or cashing in on the hard-earned value you created, you need a plan to ensure a smooth departure that leaves you feeling confident and secure.

Without an exit plan, you risk undervaluing your company, paying too much in taxes, or worse, not being able to sell the business at all. We want to ensure you can avoid this situation by understanding the key elements of an exit strategy.

Why You Need an Exit Strategy

There are several reasons every business owner needs an exit strategy. If you didn’t create one and incorporate it into your business plan from the beginning, there are many reasons to do so now.

First, an exit strategy helps you plan for the future by outlining a clear timetable that allows you to track your progress. Without a clear plan, business owners can become so bogged down in the daily grind that they lose sight of the bigger picture. An exit strategy always keeps the endgame in mind, ensuring that day-to-day decisions are aligned with the business’s long term vision.

Exit plans also make your business more appealing to prospective buyers. Why? An exit plan shows that you have a clear roadmap for the transition. And because you've already prepared financial records and have historical performance data, you create transparency, which gives buyers more confidence in your business's financial health and future potential.

Key Elements of an Exit Strategy

Set Clear Goals: Start by clarifying what you want from your exit. If you’re looking to sell your business, retire comfortably, or pass it down to your family, spell it out in your exit strategy. These key elements will steer your plan in the right direction and help you gauge success.

Determine Value: This is the cornerstone of your exit plan. The business valuation process involves thoroughly assessing your business's financial health, assets, and market position. It establishes a baseline value, ensuring you maintain realistic expectations, negotiate favorable terms at closing, and maximize your ROI.

Enhance Value: To make your business more appealing to prospective buyers, your exit plan should outline specific strategies to enhance value. This might include strategies to improve efficiency, increase profitability, and mitigate any weaknesses within your business.

Create More Than One Exit Strategy: If plan A fails, you need a backup. Diversify your exit strategies by carefully evaluating the advantages and disadvantages of various options. Are you considering selling to a third party, facilitating a management buyout, liquidating, or passing your business on to family members? Consider each option and plan accordingly.

Let’s Talk Business Value

Ready to uncover the true value of your business? At True North Mergers & Acquisitions, we specialize in helping business owners like you set and achieve meaningful goals. Whether you're focused on your company's future, your employees, or your family, we're here to guide you. Contact us now to get started!

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