Your small business exit strategy

Small Business Guides

7 min read

You will exit your business one day – whether it’s planned or not. Consultant, Katrina Aarsman, explains that if you start preparing now, you’ve got a much better chance of making a profitable departure.

Katrina Aarsman – Founder, Bookkeepers HQ

This guide is brought to you by Xero and our Xero partner, Katrina Aarsman, because we share a passion for helping businesses everywhere thrive.

You’re running a business that you love. You’re passionate. You’re the boss. You’re making a difference. But have you considered what your endgame is?

Exiting or selling your small business might be the furthest thing from your mind right now but what if you burn out? Or your personal circumstances change and you can’t put the same energy into the business? Or maybe you’ll just decide you want a really long break.

Wouldn’t it be wonderful to have the option to step away whenever you want? I’ve helped many businesses get ready for sale. And while I specialize in helping bookkeepers exit their practices, I want to share lessons that apply to all businesses.

Exiting takes planning

Exits can take many forms. They can be complete, or partial. You could:

  • stay in a reduced capacity

  • let the business run itself and enjoy passive income

  • move on and try something else

  • retire

For most of these, you’ll need to sell at least part of the business. Selling a small business isn’t typically the sort of thing that happens overnight. It takes years of planning and preparation.

You’ll need to get your books in order, of course, but there’s more to selling a business than your balance sheet. You need to make sure prospective buyers can see what they’re getting.

They’ll want to know that you deliver your goods or services in an organized, efficient and profitable way. And they need to feel like they can step in and manage that process after you’ve gone.

To give them that peace of mind, you’ll need structures in place. And you’ll need clear documentation behind them. Before shaping your small business exit strategy, however, you need to ask yourself some fundamental questions.

How to make a small business exit strategy

Start by asking what you want your exit to look like.

  • When do you think it will be?
    This can change but it’s good to have a rough timeline in your head. A schedule will help you follow through and get the business ready for sale.

  • What does the business look like at the time of exit?
    Are there things you want to do to make the business more marketable? Maybe you’ll add products, explore new markets, or try new sales channels like an online store.

  • Will you sell, merge or walk away from the business?
    Perhaps there’s a competitor who’d buy you out. Or maybe your goods or services would fit nicely inside another business? Think about why someone would want to buy you out.

  • How much would I like for my business?
    Consider what’s realistic and also ask what you need from the sale. Do your retirement plans hinge on getting a certain payout?

By working through these questions, you’ll get a sense of the work you need to put in to get ready for sale.

Remove yourself from the business

It’s much easier to sell your business if it doesn’t need you to survive. A big part of your small business exit strategy is figuring out how the place will run without you. Organize processes and workflows so you’re just overseeing the operations. You need to spend less time as an employee of the business.

  • Stop doing the day-to-day work.

  • Rely on one of your staff to be the go-to person for your clients.

  • Delegate most hands-on work.

If you’re indispensable to the business you’re selling – and you’re not going to be there anymore – why would anyone want to buy?

Create and document systems

Create a system for everything that happens inside the business, from operations to administration, and record how they work. This will take thought and time but the payback is worth it.

If you’re a service provider like me, for instance, you might create a system for onboarding new clients. Create a template that captures all the things you must do every time you open a new account. When I did this, I was able to onboard clients far faster and ensure I had consistent records for everyone.

Try to do something like this for every process in your business. Your goal is to produce a procedure manual so that systems are kept even as staff change. It’s the sort of thing that will help you now, but it will also make it much easier to sell your small business.

You won’t be able to do this overnight but try to make it a central part of your small business exit strategy. Start by scheduling the time to work through these steps:

  • Document everything you do. Record the rules you follow and the steps you take.

  • Write formal job descriptions.

  • Create templates for tasks that are repeated in your business.

If you’re indispensable to the business you’re selling – and you’re not going to be there anymore – why would anyone want to buy?

Automate what you can

As you look at each process in your business, you may find some that can be automated. Do it wherever you can. There’s affordable software and apps for things like:

There are a lot of other functions that can be automated using apps. You can integrate those apps through a unifying business platform like Xero – so you have one system for everything.

Potential buyers will love it when they can see things happen automatically in your business. It means they don’t have to spend money on people to make those things happen – and nor do they have to worry about human error.

Workflow management

You want to make it easy for someone else to step into your shoes and manage the business so create tools to help them. These might include things like workflow management reports that show how the business ticks over. Those sorts of reports will say:

  • when jobs come in

  • how they progress through the business

  • who is doing what work

Whether you’re in manufacturing or client services, you need to map out your process and track jobs as they move through. It’ll make it easier for you to keep on top of the business now, and it will impress potential buyers when you’re selling a small business. They’ll be able to:

  • see that you have a method

  • imagine a seamless handover

  • continue monitoring and improving processes after you’re gone

You can set up management reports manually, but an automated system like WorkflowMax will make it much easier. And potential buyers will take extra comfort if you have technology  to simplify the task.

If it’s better for a buyer, it’s better for you

Start bringing more structure and systems into your business as soon as you can. It will take you time to implement them and you don’t want to be trying to manage that change when you’re selling a small business. Besides, these thing don’t just make for a good small business exit strategy – they’ll help you right now. Why get everything perfect just in time to sell. Get your business in great shape before you sell and enjoy the extra profitability in the meantime.

Selling a small business checklist

If you’re in control of your business, potential buyers will know they can control it too. Systematize as much as you can. Besides making your business more efficient, systems also make it more self-sustaining. It will be able to run effectively without you, which is hugely important to buyers.

  1. Remove yourself from the business.

  2. Create and document systems for everything you do.

  3. Automate what you can.

  4. Create management reports that track workflow.

Exit happens

Exiting your business is inevitable. It will happen whether you’re in control of it or not. So speak to your mentors about what you want out of your exit, when you want it, and how to get it.

Don’t leave those conversations too late because it takes time to make a plan and execute. Getting a business ready for sale is a process.