Many business owners will be approaching their well-earned summer break over the next few weeks. This is a time to unwind and recharge the batteries!

This is also a good time to reflect on the future plans for your business. Most business owners will not have a pre-defined exit plan or succession plan and will not have a timeframe or valuation in mind. And yet, the value of your business is likely to be your most significant asset in your portfolio. How and when should you crystallise this value and how much is your business worth?

For some business owners, there may already be an opportunity to pass the business to the next generation. However where there isn’t a ready-made succession plan, business owners should be thinking about how and when to exit and how they can start to take a few more holidays each year!

Andy Moore, Managing Director, provides some tips to help make this important decision and build the key ingredients of an exit plan.

Start with your own personal objectives and ask yourself some searching questions…

When would you ideally like to retire?

How much wealth do you require?

What would happen to the business if something happened to me now?

What are the future prospects for the business?

Do you need the resources of a larger organisation to take the business forward?

These are just a few of the questions you need to answer to help you decide when is the right time to sell. Ultimately it will be a balance between lifestyle, financial objectives and doing the right thing for your business.

One of the key questions is how much wealth do you require in retirement. Anne Brookes, Head of Birmingham office of Brown Shipley, private bank, adds: “I would urge any business owner planning the sale of their business to apply the same level of discipline to their personal financial situation as they have done to the business that they are about to sell. Developing a sound financial plan and a post-sale investment strategy are key ingredients of a successful exit plan”.

Once you have a view on your personal financial needs, make an assessment of the value of your business and the timeframe to achieve your objectives. You can then build an exit plan around these objectives. Many of our clients find that having an exit plan gives them some renewed energy and focus to achieve a successful exit.

If you are still heavily involved in the business today, start to build a management succession plan to ensure you are not key to the business as the exit approaches. It is likely that a purchaser may require you to stay with the business for a transitional period, but if you are too involved, the purchaser may attribute a lower valuation to the business.

Address key commercial risks and value drivers in the business. For example, if your business relies on one or two key customers, or a sole source of supply, consider how these risks can be mitigated.

Give your business a legal healthcheck – review your contracts, compliance procedures, health and safety procedures etc and start getting your house in order. Doing things now will make the future sale process much easier.

Think about a PR plan and whether you can improve your marketing strategy, brand awareness and the profile of your business. Raising the awareness of your business will have a positive impact on future saleability.

Start to think about who would acquire your business. Knowing who will be the most likely purchasers is an important aspect of exit planning and helps to shape your thinking around how to maximise value.

Enjoy your holiday and set yourself a target to have an exit plan agreed by the end of the year!