Three common business exit mistakes and how to avoid them

Exiting a business you’ve dedicated much of your life to building is a complicated but exciting process – and one which can occasionally go awry. To help you protect yourself and your business, we’ve outlined some of the common mistakes people make during this process, and the steps you can take to avoid them.

Whether you plan to pass your business on to your children or sell out entirely to fund a lavish retirement, it’s vital you craft an effective business exit plan well in advance of your departure.

These plans aren’t just about handing over the keys to new owners. A good business exit plan provides a pathway to convert years of blood, sweat and tears invested into your business into wealth for you and your family.

Here then are three common mistakes business owners make when planning their exits, and ways you can avoid them and optimise your exodus.

1. Not weighing up all your options

Although you’ve probably given some thought to who will take over your business when you step down, what you may not have considered is exactly how you’ll pass along that baton.

Business owners are spoiled for choice when it comes to exit strategies – you might sell your business entirely, or pass it on to a family member or trusted employee while retaining a stake.

Whatever way you choose to exit your business, it could be compounded by the range of financing options available to help you execute your plan.

It’s crucial that you explore all the avenues open to you before settling on a plan, to make sure you’ve structured your exit in a way that best suits your needs. Otherwise you could be leaving money on the table or worse – you may jeopardise the future of the business you founded.

2. Not prepping your business ahead of time

Before agreeing to take on your business, your successor will likely review your accounts, run some calculations, and make an evaluation of the company as an asset.

Before they do that, you should be thinking about the features they’re likely to be assessing and fine-tuning them. This way, you’ll ensure your business is appropriately valued – and that you’re not leaving any surprises behind for new owners.

There are several simple steps you can take right now to help on this front, starting by reviewing your accounts and accounting practices. Make sure everything is up-to-date, organised, and easy to understand and replicate.

Similarly, review your tax position to make sure everything is correct.

Next, try to think about the kinds of people who might see your business as an attractive opportunity, and what they’ll be looking for. What will they see as a positive feature, and what might be a hurdle for them?

By understanding this, you may be able to make small changes today which will make your business more valuable when it’s time to exit.

3. Not positioning yourself for the future

While your business might be highly valuable in today’s market, it’s still vitally important you futureproof your business.

In the last few years, the Australian economy has undergone significant change. Many Australians are working from home with little desire to come into the office – many are even willing to sacrifice as much as 8% in wages if it means staying at home.^disclaimerMeanwhile, some industries are being completely reshaped by new AI-based technologies.

For a prospective business owner, these and other changes raise a serious question: how worthwhile will this business be in five, ten, or 20 years’ time?

While there’s no way to predict the future, you should be attuned to the trends shaping your industry now and taking steps to ensure you remain ahead of the curve.

Although these challenges may not affect your business in your tenure as owner, your approach to handling them today can affect its value when you sell, or its longevity once you leave.

If you choose to maintain a stake in the business after handing over the reins, these changes could drastically affect your financial position even in retirement.

Learn more

To find out how ANZ Private can help you transition through the sale of your business, get in touch.

• Talk to your ANZ Private Banker directly
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