Business exit strategy and succession planning are common terms you have heard thrown around in the world of business, but are you aware of the differences between the two? While they both involve you stepping away from your business, each provides a different avenue to do so. This doesn’t mean you have to choose one or the other, however, as a well-calculated succession plan and exit strategy can complement each other to deliver a successful outcome.
If you’re seeking expert advice to assist with business exit planning, contact us on 07 3391 1188 or reach out through our online form to arrange a consultation.
What is the Difference Between Business Succession Planning and Business Exit Plans?
Business Succession Planning
When you wish to pass your company to your chosen successor after departing, then a succession plan is required. This allows you to ensure the business is left in capable hands after you depart, and that the values and strategies you instilled into the business are retained to give it the best chance of continued success.
This contrasts with a business exit strategy, where you do not play a part in choosing your successor after you leave the business. In basic terms, succession planning requires you to look inwards in the business for your successor, while business exit plans typically involve selling to a buyer outside the company.
Business Exit Plans
A business exit strategy is the process of exiting your business so you can either retire or move on to other business ventures. This is achieved either by selling the business or by transferring ownership to an agreed party, allowing you to leave the business on your terms and with your desired return on investment.
To ensure you receive the best outcome, it is important that you set goals and timelines for what you hope to achieve from the sale. Unlike succession planning, exit planning may not allow you to plan for the future of the business once you depart, as the new owners are free to run the business as they wish once you relinquish ownership.
The Importance of Using Both a Business Exit Strategy and Succession Planning
While an exit strategy and succession planning serve different purposes, they can be combined into one effective strategy to help you exit your business in the most profitable way. Incorporating succession planning into your strategy allows you to begin training your successor so the business can continue being successful even after you leave. Planning for this as early as possible gives you more time to ensure the business is left in capable hands.
Your exit strategy, on the other hand, will be focused on your eventual departure from the business. It involves planning for your financial goals, so you leave the company with the right amount of capital to fund your retirement or next venture. Your strategy will also involve determining your planned exit date from the company, and whether you wish to sell the business outright or transfer ownership to a nominated successor.
Seeking Advice for Your Business Exit Strategy?
At Taggart & Partners, we specialise in SME accounting and can provide industry-leading advice to help you achieve a successful exit from your business. Whether you are considering an exit strategy or wish to begin succession planning, reach out through our online form or contact us on 07 3391 1188 to get started.