When setting up a limited company, it’s likely that the last thing on your mind is thinking about leaving or selling your business. However, having an exit strategy in place is a crucial component of any business plan to help ensure long-term growth, increase the potential exit valuation and help to attract investors.
In this article, we will set out why you need an exit strategy for your business and how the best accountants in London can help you with this.
What is an exit strategy?
To put it simply, an exit strategy is a strategic plan you put in place when setting up a limited company which outlines how you intend to sell your company to either another company or to investors.
Why do I need an Exit Strategy for my Business?
- It gives you something to aim for
A good accountancy firm in London will recommend that in order to make sure your business is heading in the right direction you need an exit strategy which gives you something to strive for. An exit strategy helps you to set goals when setting up a limited company, outcomes for the business which indicate success, and a timeline for marking progress and expected achievements.
Personally, it helps you to think through when an appropriate exit would be for you from the company. What do you want to achieve in a certain time-frame and how do you see your company looking in ten years’ time?
- It will help to increase the value of your business
When we speak about value, we don’t just mean monetary value. However, having a robust exit strategy in place when setting up a limited company will help you achieve a good sale price for your company.
Even if you are not planning on selling your business imminently, the presence of a well-thought-out exit strategy will mean that you enjoy the benefits of prior planning and increase the value of your business through making the most of opportunities when they occur. Speaking to an experienced accountancy firm in London will give you a great head start in putting together an exit strategy that will help your company to thrive.
- It puts robust financial plans in place
It may be surprising to hear that many investors want to see a robust exit strategy in place before they invest in your company. By including an exit strategy in your preparations when setting up a limited company it will help you to put robust financial plans and strategies in place. This will help in creating a well-thought-out financial plan for your business, as well as making your company look attractive to potential investors.
An exit strategy also helps you to think about all of the administrative steps you’ll need to put in motion before you can leave – such as any legal contracts and a valuation of the company. By having this plan already documented, the execution of the exit will be significantly easier.
- It encourages strategic thinking
Having an exit strategy in place will help prevent your business from growing stagnant. By having an ultimate endpoint which you seek to achieve, you will be encouraged to implement strategic thinking which can guide your business in the right direction. Reviewing your exit strategy regularly is a good way of regaining your enthusiasm and drive for your business.
Through selecting a good accountancy firm, you will have an expert on board to make sure that your exit strategy is achievable to ensure your business stays on track.
- It means you leave your business in a good position
When you leave your business it’s not just about securing a smooth and financially rewarding exit for yourself, it’s also about making sure your business is in a good position to prosper (should it continue to run). A key part of this is making sure your exit strategy considers how employees will be affected and how they will be kept informed about the change in ownership. Thinking through the effects of your exit on employees, and making sure their best interests are a key part of the process, will help to ensure your business continues to thrive once you have left and make it attractive to potential buyers.
Formulating an exit strategy isn’t about predicting your companies end when you are just setting it up, rather it is a way of creating indicators for success and effective guidelines to achieve your aims. Getting the advice of an experienced accountant will assist you in creating an exit plan that both makes the process smooth when you do decide to leave, as well as being a useful strategic tool in ensuring your company’s continued growth.