Ten Succession Tips for Sole Traders: What kind of Business Exit Plan can you have as a sole trader, and what are your solutions, particularly if you have no staff or family members interested in taking over your business when you leave?
How do you organise an exit strategy to ensure you leave with a profitable outcome? These are all good questions, and each have answers worth considering
If you are a Sole traders that believes you are at a disadvantage with limited succession solutions available to you when arranging your business exit plan, think again!
If you believe your business succession solutions are lconfined to waiting for someone to come along and buy your business, time to think outside the square!
There are a number of succession solutions available, so that you too may capitalise and maximise your position with a well thought out business exit strategy, and well before you decide to leave. Here are ten tips to arrange your sole trader Business Exit Plan:
- First and foremost, make sure your business has a proven track record with financial accounts and tax statements to verify the income and profits of your business and demonstrate its value.
- Get your business premises organised and attractive. Organised businesses attract better valuations which means a better outcome for you.
- Arrange a database of your customers with well documented systems and processes. If is easy and attractive for someone else to fulfil your role when the time comes for you to leave, candidates will be more willing to enter into the business exit strategy with you.
- Start communicating your business success to colleagues of business associations, competitors and trading partners to make your business a well known and attractive proposition. Your colleagues may well be your succession solutions ticket to an organised business exit strategy.
- Lift your business profile so others take enough interest to be willing to enter your business exit plan.
- Your business succession options may include prospecting some of the newer graduates, trainees and apprentices you meet at business associations. They may currently be working with your competitors, but aspiring to one day own their own business. To them you can demonstrate how you’re devising a business exit strategy to help younger people on a path to owing a business with instant income rather than enduring the time with peaks and troughs of building a business from scratch.
- When you’re comfortable, approach someone in your network and aske them to enter an agreement with you to one day buy your business with specific terms itemising possible events that could cause you to leave. The agreement terms must include retirement or other matters that could cause you to leave your business, such as a desire for difference, divorce, desire to retirement, or circumstances beyond your control such as illness, accident or death.
- Make sure your agreement includes terms for funding the succession solutions such as vendor finance terms and insurance to cover the contingencies
- Lock in the future sale price with a business exist strategy that formally values your business and the price with terms according to the situation. You may choose, for example, to use a formula of multiples of averaged income or turnover for the accounting period proceeding the exit date which will benefit you by securing the price you will receive through all circumstances.
- This business exit strategy is known as the ‘friendly rival’ strategy because it can be arranged with a prospective competitor.
Any agreement you set up should be arranged by an experienced specialist and make provision for the changing value of your business with care about the tax implications upon changeover. It should also provide for terms to protect your business asset from the contingencies, with insurance to cover sudden illness, accidents and death.
Putting a ‘friendly rival strategy’ in place will allow you the comfort of knowing you have a certain buyer when the time comes for you to leave your business, no matter what the circumstances. It will also provide you with assured financial security into the future and take the pressure off of finding a buyer if you ever have to suddenly leave.
Sharpen your business exit plan in a way that will enhance your exit strategy.
Take action today, and get started with your Succession Solutions. Go to the customised business exit strategy quiz, invest 3 minutes of your time to receive your customised report with a ‘To Do’ list so you can get started on your plan of action and enjoy the secure difference you’re looking for.
To Your Business Succession!