You are an LGBT entrepreneur and working hard to build your business. Eventually, you’ll leave your business someday, so how do you make sure it’s on the best possible terms? We asked business advisors and brokers on how to prepare a sound exit strategy. Here’s their advice.
Every LGBT Entrepreneur needs one. So, what is a business exit strategy?
An exit strategy is a plan for winding down the involvement you contribute in your GBLT owned business. For many entrepreneurs, that means getting the business ready for a sale and thus a change of ownership. Preparing, documenting and following a well-thought-out exit strategy can improve your company value, while providing the company you worked so hard to build has the best chance to thrive after you are no longer directly involved.
No matter if you plan to leave your business in two, six, or twelve years, planning on an exit is a smart idea that helps you in your business strategy. Getting a business ready for a sale and new owner can take a considerable about on time depending on the complexity of the business it could take years.
Having a business exit strategy in place will assist in the process. It also provides a bit of freedom in that if you’re ready to sell, you may do it at any time. That provides you options and peace of mind.
If you’re passionate about what you’re doing, business will be much more fun. Connect with other LGBT entrepreneurs, startups, business leaders and professionals here on OutBüro – the LGBT business, entrepreneur, and professional global community.
How to plan an exit strategy for your LGBT owned business
Business experts advise following these nine steps to building your business succession plan.
1. Plan for your most likely buyer
Be sure to have a business plan to guide your company direction and growth. The type of most likely buyer will greatly be dependent on the type of business you own and if you intend to sell to another company or perhaps to pass it to a family member.
- Family / Close Friends: If you’re selling to family, take extra precautions to make everything transparent and fair. You don’t want the business transaction to cause tension or conflict between family or close friends.
- Current staff: You might find that a current employee would like to buy the company. This could be a great idea for the continuity of running the business. However it is not often an employee who will not have the funds available to pay in a lump sum, so be prepared for staggered payments.
- Highest bidder: Gaining the highest sale amount can be a reward for all your hard work. However, it does require the most effort during the sale process and transition to the new owners. All the business records will need to be in order else they won’t have any idea how you operate or the value of the company.
2. How quickly would you like to plan your exit
Not all buyers are equal. Some buyers, such as friends, family, or staff, may not have the funds to fully pay right away. Can you live with receiving a deposit and being paid the rest from future business income? To guarantee the continued success of the business and thus your payment you might need to remain involved in the business to a degree and diminish that and your level of ownership as your payments progress successfully. If a complete break is what you want, then, selling the business to the highest offer is likely your best path if your transition is well laid out and the purchasing party can assume your business without major disruption to operations and clients. If there is a risk of disruption, you might be contracted as part of the sale to remain involved for a period of time to ensure clients remain/customers happy.
3. Get and keep your financial records in shape
Smart buyers will ask to see at least two years’ worth of clean and dependable financial records. Are you maximizing your cash flow? If your bookkeeping isn’t all it could be, get it fixed now. And if there’s something you can do to improve profitability, do it as soon as possible. You want that upswing to show in your accounts as a sustainable trend rather than as a recent spike.
4. Make yourself expendable
It may sound odd that you’d want to make yourself expendable, unimportant, and replaceable in your own company when you have the right team of employees. However, why would someone else or another company purchase your business if it’s future continued success rest squarely and solely on your shoulders? Nope. Won’t happen. So you must get to the point of leading your company and allow your team to do their jobs with the training and authority to succeed. This will also mean being less involved with the clients and customers. You may even – GASP – need to force yourself to take more time away from the office and delegate decision making.
5. Get lean and document EVERYTHING
Review everything you, your company, and your employees, contractors, and service providers do. Document the business process by job function. How do things get done? Who does it? What is the prerequisite to each step and what’s the next step? Have job descriptions in place for roles remembering that a person might be filling multiple functional roles. Search the internet for job description templates – why reinvent the wheel. It might give your insight and make you consider things not thought of on your own. Review dependencies such as any vendors that provide services, finished or raw products documenting what each does and provides, why, and how it contributes to the operations. Also, document all the technology that supports your business functions. Document how you market your business, the social media channels, and any promotional events or organizations the business participates in. Review all legal documents be it with landlords, suppliers, partners, vendors, and employees. If you have employees, be sure to have written human resource policies in place. Doing an internet search can provide loads of HR policies ready for your business to leverage.
6. Leverage technology
Today there’s an app for almost anything. While reviewing the company processes above consider what online software solutions you can leverage to get and remain organized.
- Employee time tracking
- Client billing
- Mileage tracking
- Financial accounting
- Sales funnel tracking
- Customer relationship management
- Client invoicing / payment
- Appointment booking
- Survey taking
- Email marketing
- Lunch delivery
- Social media simplifying
- and so much more depending on your needs… yes, likely there’s an app for it
Before launching into each, try doing a broad search for solutions that work well together. If needed, there are online application integration solutions.
7. Continue to build and grow increasing your business value
Getting ready for an exit is no time to coast along. You need to be working hard to attract new customers, retain and extend contracts with existing clients. Keep the marketing momentum and even increase marketing if needed.
- Review your marketing material to ensure it conveys the value of your business services or products clearly and focused on your target audience.
- Review and focus on your business plan.
- Review and hone your online search results so customers can easily find you.
Why is your LGBT owned business great? Is your product or service superior to others? Do you have really loyal customers? Is there any intellectual property you created?
Now also look at your weaknesses and step up to address them as best you can. Get outside opinions when you can for an objective view. someone who does.
8. Get a guideline valuation
You won’t know what you’ll get for your business until the day it’s sold, but you can get a rough estimate. Ask for a professional opinion. Your accountant should be able to introduce you to someone, or you could speak to a local business broker. A guideline valuation will help satisfy your curiosity and set realistic expectations. If they predict a lower price than you’d hoped, you might delay your exit, and spend some time building value in the business.
9. Work on a sales pitch
Buyers need to be excited by your business, so come up with an elevator pitch that captures the essentials. Craft a story that explains why you got started, how you’ve grown, and what you’ve achieved. Paint a positive picture of the future, too, but keep it real. Incorporate stats and facts to support what you’re saying.
Exiting your business is inevitable. It will happen whether you’re in control of it or not. So make a plan now and start getting your business ready for the next owner. It’ll help you command a better price, and increase the chance that your business survives.
And remember that anything you do to benefit your future buyer will also benefit you. You’ll have a more efficient, profitable, and easier to manage the business.
It’s never too soon to build a business exit strategy.