Uniting Bookkeepers - Exit Planning

Before you start your journey, it is important that you know your destination. Similarly, in any business planning exercise it is beneficial to establish your objectives before you start to plan.

Other considerations for Bookkeepers at this time (November 2009) in Australia is the Tax Agents Services Act 2009 which is literally forcing you to gain academic qualifications and to register with the Tax Practitioners Board. (That is if you do not not have your qualifications.)

Why you need an exit strategy

If you're setting up a new business, or reviewing your goals, you'll have a clear vision of what you want to achieve from it. To maximise the value you get from the business it's essential to think about how you'll leave it further down the line.

Carefully planning your exit from the business can help you to:

mould your business into the ideal shape for your chosen exit option - maximising the value you get from it
groom successors if they're coming from within the business - whether they're a family member or part of your management team
exit at a time of your choosing, when the business is doing well and the market conditions are advantageous

Ideally, you should include an exit strategy in your start-up business plan. It can then be reviewed and revised whenever you work on your annual business plan and budget - and you can steer your business in the direction that your exit option demands.

If you manage an existing business and don't have an exit plan, you should now think about what your preferred exit option might be - and consider whether you could change the way you run your business to help you achieve it.

Below is an Exit Planning tool which gives questions to consider when planning how you would exit your business.

1. Aspirations and Objectives

1.1 Personal aspirations

What do you wish to get from your business before you exit?
In what capacity do you wish to work in your business up to exit?

- Full time YES/NO

- Part-time YES/NO…………….(hours per week)

- Complete control of business YES/NO

- Delegate control to managers now YES/NO

- Delegate control to managers increasingly up to exit YES/NO

1.2 Business objectives

What is the current turnover (sales) of your business?
What is the current net profit before tax of your business?
Where, in terms of turnover and net profit BT, do you want your business to be in:

- Five years: $ …………………….. (turnover) $………………………. (profit)

- Ten years: $…………………………………………$……………………….

- When you exit (200 ): $ ………………………$……………………….

2. Foundation issues

2.1 Do you have any partners or shareholders in you business? YES / NO

(If no, please ignore questions 2.2 to 2.5; if yes, continue.)

2.2 If you have fellow shareholders or partners, do you currently have a shareholders’ agreement in place? YES/NO

2.3 If yes, do you believe your agreement adequately covers all issues thus giving you maximum protection and freedom to exit? YES/NO

2.4 If no, do you believe you need a new or revised shareholders’ agreement? YES/NO

2.5 If yes, what provisions in the shareholders’ agreement are you particularly keen to have included?

- General pre-emptive rights

- Options for remaining shareholders to acquire other shareholder’s shares in case of death, disability, retirement & bankruptcy

- ‘Drag along’ provisions

- ‘Piggy back’ provisions

- Dividend policy

- Others:

3. Business & Exit planning

3.1 Do you have a written business plan for your business? YES/NO

3.2 If no, do you think it is a good idea for the business generally and your exit planning in particular to produce a business plan YES/NO

3.3 When do you wish to exit from, or transfer ownership of your business?

3.4 Why do you wish to exit/transfer/retire from your business?

3.5 What do you believe is your optimum exit option?

- Trade sale

- Family succession

- Management buy-out/buy-in

- Public Listing/Flotation

- Sole trade merger

- Franchising

- Other

3.6 Why do you believe this is the optimum exit option for you?

4. Business value

4.1 What do you believe is the current value of your business? $…………………….

4.2 How have you reached this valuation?

4.3 What do you wish the value of your business to be (the ‘target value’) when you exit/transfer? $………………..

4.4 How do you believe you will achieve the target value?

4.3 Do you expect to be paid full value for your business on exit/transfer? YES/NO

4.4 If no, please explain, (for example you might be transferring your business to an heir and don’t wish/need to be paid in full at time of transfer; or you might be prepared to offer terms to the purchaser to facilitate the sale).

5. Impediments to sale

Impediments to sale are those things thatreduce a business’s value or make it difficult to sell. In this section firstly examine your business and secondly think carefully about potential buyers of your business.

5.1 What, in your opinion are the major impediments to sale in your business? (Please list them in order of importance.)

5.2 What steps do you think are necessary to remove the major impediment to sale from your business?

5.3 How long do you estimate it will take to remedy the major impediments? …..YEARS

5.4 What are the lesser impediments to sale? (Please list.)

(NOTE: If you wish, you can complete a SWOT analysis of the business)

5.5 Are you aware of any buyers for your type of business? YES/NO

5.6 If yes, are you aware of what these buyers are looking for in their acquisitions, or what things they consider reduce the value of their potential targets? YES/NO

5.7 If yes, please explain:

a) The potential buyers I know are looking for business with the following characteristics:

b) The things that potential buyers do not like in businesses of my type are: