Business Exit Strategy Planning
A business needs to know where it is, where it’s going and how to get there by the use of market research, analysis and decisions on strategy, but the same research may also show that one or more of its product niches, subsidiaries or the whole business, is entering mature hyper competitive market conditions or even becoming obsolete due to technological or other new disruptions.
Unless you are the dominant player in your niche, (and even then there is no guarantee if the market is being disrupted), business will get tougher, less profitable, you’ll suffer higher stress and over time you will lose some or all of the value of that business. That’s your main nest egg or pension gone if you are a business owner or it could cost you your job if you are an executive in charge.
The highest return one can get is not in starting or running a company but from the sale of that company at the optimum time to a premium buyer. CEO’s, executives and business owners know this and yet still stay too long, believing they can extract / create more value from the mature company. Sometimes they can but mainly it’s diminishing returns on their time and capital invested and the risks increase significantly.
Rather than “grind it out” it may well be better to divest that business unit sooner for a premium price rather than later for any price you can get, then re-deploy the capital into newer less competitive higher growth areas for a better investment return.
The secret to realising a premium priced exit for a business is in timing and in knowing who is going to buy it in the first place, and that comes down to market research again then planning the exit early, including tailoring the way you build the business so it’s more attractive to the buyer you have planned to target.
Building to sell requires different strategies from how most businesses are grown, but this does not mean you need to sacrifice all short term profits in order to achieve a higher level successful exit. Both can be achieved with the right planning and strategies.