Business expert Liz McKeon offers solutions for Exit Strategies
When the time comes to move on from your business, do you have a plan?
In challenging times, it's important to think about the future and what you plan for the future of your business.
There will come a time when it doesn't suit your current life situation, whether that's due to family or financial changes or you may be ready to retire or even switch to another business.
Every salon owner needs an exit strategy, because at some point, for whatever reason, it will be time to move on from your business.
When thinking about and planning your exit strategy, the two most fundamental questions to ask yourself are:
- How am I going to get my money out of the business?
- How much money will I get?
It is advisable to plan your preferred exit strategy well in advance, as it can be a lengthy process. There are also many options available to you as a business owner, some more easily achieved and less administratively challenging than others.
Here are some options to consider:
This is the ‘close up shop and sell all the assets' exit strategy. For a very small salon, especially those that are dependent on the performance of a single individual, liquidation is sometimes the only option, as there's really nothing else to sell. It might be advisable to restructure the salon so it can be operated by somebody else, turning it into a salon for sale.
Keeping your business in the family
This is the dream of many salon owners, as keeping your business in the family ensures that your legacy lives on and provides a living for your heirs.
The advantages to this are you may be able to keep a hand in the business in an advisory capacity. However, you need to know that the family members have the skill, interest and commitment to take over.
Sell your business to your manager/employee
This is ideal, as the employee gets an established business that they are familiar with and enthusiastic about. It's possible to arrange a long-term buyout, which can increase loyalty and greatly motivate staff to work hard to make the business succeed. Again, this arrangement may allow for you to stay on in an advisory capacity. Handled carefully, this option should have very little impact on clients.
Sell your business on the open market
This is the most popular exit strategy option for salon businesses. The business owner puts the salon up for sale for a certain price, and hopefully walks away with the amount of money they want to get for it.
A profitable, well run salon should be attractive to buyers and sell quickly. Assets, database, salon name and good will can be incorporated when valuing the business for sale, maximising the return to the owner. However, salon businesses can be difficult to value and the selling price may be much lower than expected.
If this is your preferred exit strategy, spend time grooming your salon for sale, making it as attractive as possible to potential buyers.
To get the best price when selling a salon:
- Sell at the right time, for the right reasons otherwise a buyer will use your circumstances to leverage against you.
- Determine what your salon is actually worth; invest in a professional valuation, while accepting that your salon is worth as much as it will fetch in the marketplace.
- Make sure your house is in order. People want to buy a thriving salon business, not a neglected one.
- Keep all business records up to date
- Make sure the premises is well maintained and attractive to potential buyers
Whichever exit strategy you choose, planning in advance gives you time to do it right – and maximise your return on investment.
Liz McKeon is a successful Business Coach, Trainer, Author and Mentor, whose expertise lies in growing small businesses from scratch and taking existing companies to profitability.