Three common business exit mistakes and how to avoid them

Whether you plan to pass your business on to your children or sell out entirely to funds for retirement or other assets, it’s vital you craft an effective business exit plan well in advance of your departure.

These plans aren’t just about handing over the keys to new owners. A good business exit plan provides a pathway to convert years of blood, sweat and tears invested into your business into wealth for you and your family.

Here then are three common mistakes business owners make when planning their exits, and ways you can avoid them and optimise your exodus.

Before agreeing to take on your business, your successor will likely review your accounts, run some calculations, and make an evaluation of the company as an asset.

Before they do that, you should be thinking about the features they’re likely to be assessing and fine-tuning them. This way, you’ll ensure your business is appropriately valued – and that you’re not leaving any surprises behind for new owners.

There are several simple steps you can take right now to help on this front, starting by reviewing your accounts and accounting practices. Make sure everything is up to date, organised, and easy to understand and replicate.

Similarly, review your tax position to make sure everything is correct.

Next, try to think about the kinds of people who might see your business as an attractive opportunity, and what they’ll be looking for. What will they see as a positive feature, and what might be a hurdle for them?

By understanding this, you may be able to make small changes today which will make your business more valuable when it’s time to exit.

While your business might be highly valuable in today’s market, it’s still vitally important you futureproof your business.

In recent years, the New Zealand economy has experienced significant changes. Many New Zealanders prefer working from home and are even willing to accept lower wages to do so. Additionally, some industries are being transformed by new AI-based technologies.

For a prospective business owner, these and other changes raise a serious question: how worthwhile will this business be in five, ten, or 20 years’ time?

While there’s no way to predict the future, you should be attuned to the trends shaping your industry now and taking steps to ensure you remain ahead of the curve.

Although these challenges may not affect your business in your tenure as owner, your approach to handling them today can affect its value when you sell, or its longevity once you leave.

If you choose to maintain a stake in the business after handing over the reins, these changes could drastically affect your financial position even in retirement.