It can seem a little incongruent to plan your exit when you start your business, but for entrepreneurs in their fifties, who are starting and growing small to medium enterprises, it should be a key part of your planning.
The reason is simple, according to Shelly Buys, a business coach who is increasingly working with people starting businesses after they’ve spent decades in full-time employment.
“Dedicating your fifties and onwards to a new business means dedicating time in your life that is closer to retirement than if you had have started your business in your twenties,” says Shelly.
This is not negative in the least, but does mean the value you build up in your business will be vital to your retirement plans.
Sue, 57, is in full agreement. At 47, she set up her industrial PR and media relations company, after a long and highly regarded career as a director for a bi-lateral trade organisation.
Like many small business owners, Sue’s business represents a considerable asset. She has grown its turnover and its value for the last eight years. This is value that Sue now wants to release as she begins to consider retirement.
Why you need an exit strategy
An exit strategy first crossed Sue’s mind four years ago, and she’s mulled over it ever since. It’s this year, though, having weathered the recessionary storm and its attendant crisis management phases as clients cut budgets, that the topic has become a higher priority.
Shelly raises a further point, one again relating to time. “If you start a business in your fifties, you have less time to exit it than if you started one in your twenties.”
She cautions that this is not an ageist statement, and that there is an exception to every rule. “In fact, I’m starting to see exit strategies included in business courses, and hear it discussed in more places, even at conferences aimed at younger business people.”
Certainly those in the tech industry are all too aware of the need to have an exit strategy in place for when their app takes off.
Average age of first-time start-ups
There are so many positives to starting a business later on in life. Not least the skills and contacts book that many of us in our fifties have built up after years in the commercial world.
It’s also becoming clear that entrepreneurs in their fifties, who get turned down by the banks for investment, don’t take no for an answer but resourcefully find ways to fund their own businesses.
Younger entrepreneurs don’t always have that innate resilience, or the network of contacts to ask for seed investment.
If any more evidence was needed to show that entrepreneurship is not exclusively a younger person’s game, it surely must be the fact that a recent study showed the average age of an entrepreneur in London starting a business for the first time is 55.
It remains useful, though, to have an exit strategy in mind if you start a business in later life due to the shorter nature of your enterprise’s life. When you’re in your twenties and starting out in business, theoretically, there is more time on your side.
Exit strategy for a small business
“First, there are various exit strategies available to the small business owner, not all of which will suit every small business,” says Shelly.
Plans and structures need to be put in place dependent on which exit strategy an entrepreneur of a small business decides to employ.
Mentoring, with a view to selling the company to the mentee, is one such option, which appeals to many service-orientated small businesses.
“I’ve seen marvellous success with this option, as it allows the commercial transaction to take place with a great deal of trust,” says Shelly.
Original owners, who often have close and respectful relationships with the clients they’ve serviced over the years, are able to hand over the reins of the business feeling confident about the new hands at the tiller.
Just because the original owner is no longer part of the business does not mean that their legacy and reputation don’t live on in the brand.
Understandably, finding the right person to mentor is the first challenge, but the rest of the process requires time too. “You could be looking at a five-year plan,” says Shelly. “Hence, if you start a business at 50, your exit strategy needs to be well thought-out beforehand.”
It’s worthwhile to remember, too, that other exit strategies also require time investment as, whatever the method chosen, there is always due diligence to be done.
Sue adds another point. “Settling on the right strategy for your business doesn’t happen overnight, and taking time to work with people to create the right one for what is really the symbol of your blood, sweat and tears, on top of managing a full workload servicing that business, is a big pressure.”
She understands how having had a blueprint at the start of her business would ease some of the pressure now.
Conditions when you sell your business
That’s not to say an exit strategy articulated at the start of a business stays static. Instead, it becomes a working document, acting as a guideline throughout the years, as to the items a business-owner needs to pay attention to.
In broad categories, these are the general market conditions (boom can turn to bust quite suddenly, as we have learnt), what your business is worth, growth targets and trends, and your own financial requirements.
Most importantly, spend some time working out who your buyer is. It’ll help you to market – and speak – to the right person or group.
Selling your business to a competitor
Competitors could be interested in acquiring your company, for example, because of a patent you have, whereas an employee thinking of buying the company might place higher value on the client list.
With time being of the essence, you don’t want to waste any engaging with the wrong buyer, not when it delays you realising the value you’ve spent years building up.