Any business owner knows that a business’ health doesn’t just depend on the strength of its performance right now, but on the strength of that long-term plan for scalability and adaptation – and, of course, the ‘what ifs’ that will always pose a threat to any business in any industry.
A key aspect of this long-term plan is the exit strategy. Without one, transferring ownership of the business to a new pair of hands – whether they belong to another person, or another entity – becomes an incredibly complicated and long-drawn-out process.
Here is what you need to know – and why you need to know it.
What is an Exit Strategy?
Put simply, an exit strategy is there to protect the business during a change of ownership. It is created in advance of an intention to sell, and, depending on the ideal scenario – whether you wish to sell to a third-party, to a member of your own family, or hand the business over to employee ownership (Employee Owned Trust) – an exit strategy is purposefully designed to meet your requirements. It can also be created and used during a liquidation process, if need be.
The exit strategy is the perfect example of pre-planning. It takes a considerable weight off your shoulders – the weight of seeing to the business, ensuring continuity, minimising the disruption, and fulfilling your usual role until you have made your exit. Its value to you is, however, dependent on the strength of its creation. Working with your corporate solicitors to create something that will truly benefit the company is essential.
What is the Difference Between an Exit Strategy and a Succession Plan?
Exit strategies and succession plans fulfil similar roles in a business. They both seek to address that point in the future when you are ready to hand the business over to new leadership.
The key difference lies in who the business is being passed onto. Generally, a succession plan is there to manage a shift from one generation of leadership to the next – or, in other words, passing those leadership roles onto key talent already within the business. Identifying key talent is central to creating a succession plan.
This is why succession plans are put forth as a highly effective means of retention. They map out a clear future of growth, and represent a palpable investment into people who will, one day, oversee the business as you do now.
How Do You Create an Effective Exit Strategy?
Exit strategies and succession plans are incredibly complex, and there is no one-size-fits-all approach to creating one. The right strategy will be informed by the unique needs of your business and, for that reason, you need to be able to turn to the expertise of corporate solicitors who have guided many different businesses through the process before. Only with their help can you feel sure that you have secured your business’s future against all the possibilities.
Ensuring that the business you have cultivated over the course of many years will be able to thrive as you depart is vital, and it can’t be delayed until further notice. No one can be sure about what’s around the corner, but we can feel sure that exit strategies and succession plans will always be needed eventually.
