There are many steps to creating an effective business exit planning strategy. As part of your overall strategy, this plan will prepare you for unexpected opportunities, identify gaps in your ROI, and have a clear plan for transitioning with the greatest profit. The valuation portion of a plan is often the most important and time-consuming part to compile.
The most important aspect of the plan will be your calculation of value. There are two different ways of determining this, depending on if you are focusing on selling your company to employees or individuals already in the industry, or to 3rd party investors who are not familiar with it.
When determining the value of the company, it is helpful to categorize assets to reflect gross real property such as your building, merchandise and services less costs. When putting a value on a building, it is important that you evaluate comparable commercial real estate to develop a valid figure. The volatile real estate market has resulted in a decrease in the value of commercial buildings, so current market value will require some research.
If your company is a part of a franchise, the current cost of joining the franchise will be the basis of its value. You will also include products, marketing materials, and other items that you were required to purchase as part of the franchise agreement. An established company will have attained value based on its marketability. The value of your company, when categorized, will be important to all potential buyers.
When preparing a plan focused on 3rd parties or non-industry buyers, the plan will be market driven. It must have concise and clear information that is more detailed than what would be necessary for a buyer in the business. When you are completing this part of the plan, with 3rd parties in mind, including information that is not vague will help you communicate more effectively.
When you are considering selling internally, a less market-driven valuation is appropriate. In many cases, the categories included in a market-driven valuation are combined in a single group with more concise detail regarding depreciation and market movement.
By developing effective business exit planning strategies, you will know the value of your company and be able to identify gaps in your revenue streams that can be addressed before they become a problem. Many entrepreneurs who have never done a valuation of their company work with professionals who are knowledgeable and experienced in this area. They will help you to develop a plan that can easily be updated on an annual basis.
The most important aspect of the plan will be your calculation of value. There are two different ways of determining this, depending on if you are focusing on selling your company to employees or individuals already in the industry, or to 3rd party investors who are not familiar with it.
When determining the value of the company, it is helpful to categorize assets to reflect gross real property such as your building, merchandise and services less costs. When putting a value on a building, it is important that you evaluate comparable commercial real estate to develop a valid figure. The volatile real estate market has resulted in a decrease in the value of commercial buildings, so current market value will require some research.
If your company is a part of a franchise, the current cost of joining the franchise will be the basis of its value. You will also include products, marketing materials, and other items that you were required to purchase as part of the franchise agreement. An established company will have attained value based on its marketability. The value of your company, when categorized, will be important to all potential buyers.
When preparing a plan focused on 3rd parties or non-industry buyers, the plan will be market driven. It must have concise and clear information that is more detailed than what would be necessary for a buyer in the business. When you are completing this part of the plan, with 3rd parties in mind, including information that is not vague will help you communicate more effectively.
When you are considering selling internally, a less market-driven valuation is appropriate. In many cases, the categories included in a market-driven valuation are combined in a single group with more concise detail regarding depreciation and market movement.
By developing effective business exit planning strategies, you will know the value of your company and be able to identify gaps in your revenue streams that can be addressed before they become a problem. Many entrepreneurs who have never done a valuation of their company work with professionals who are knowledgeable and experienced in this area. They will help you to develop a plan that can easily be updated on an annual basis.
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If you are thinking of buying a company you might also want to consult an expert on the procedure of exit planning
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