While it might seem contrary to the entrepreneurial spirit, an exit plan is always vital.

How could you plan to hand your SME on?

While it might seem contrary to the entrepreneurial spirit, an exit plan is always vital.

In fact, having an exit strategy from day one is vital to a sensible, fully-rounded business. This is possibly even truer in the UAE than in many other countries, given the dynamic, ever-changing pace at which our economy operates.

If you haven’t given it much thought to date, here are some tips on why you should create your SME exit plan – and how.

An exit plan isn’t failure
Plotting where the business goes when the founders move on isn’t the same as winding a business up. An exit plan should be ‘the next stage’ – whether that is to sell the enterprise ‘as-is’ to someone, or to market its assets and order book to others to purchase in part.

Having one will increase your attractiveness to investors
Banks and individuals are less willing to invest in a business that’s wholly or largely dependent on one person (or a few key people).

The prospect of that person leaving, or suffering an accident that prevents them working, can put the business’ whole profitability and even existence at risk.

Conversely, a good exit strategy, well matched to the characteristics of the business and the market, will increase your chances of success, possibly shorten the time needed to be ‘exit-ready’ and, often, significantly increase the value of the company at that moment – all aspects likely to appeal to investors.

It could help you to run the business
An exit plan plays a role in how you manage your company and shape its growth strategy. For example, if you’re working to build up value towards one day selling on, your operations are likely to be very different from trying to run a business for ongoing profits.

It can take a number of different forms
There are several exit options available. Choosing which to aim for could influence the path your business takes in the interim. These include:

  • Selling. Some entrepreneurs see selling a business they created as ‘giving up their baby’. Others are happy to pursue this course from day one. The truth is that selling up almost always increases personal wealth. This could then enable you to start another business, invest in several others and so on – ultimately making you more of an entrepreneur than that initial business ever would or could.
  • Merging. You might want to position your exit as a transition, where you leave only after ensuring the business, clients and employees will continue to thrive. You could take on an advisory role to retain some interest. Merging like this, often with a bigger group, can also enable the business to increase market share, enter new markets and develop fresh products. A merger can always be a step towards a full exit later too.
  • Closing. This isn’t an option most people would consider, but a good SME owner does. Circumstances outside your control may force it to happen, so prepare for each and every one. Doing so might even convince you to adopt a shorter-term business plan, with the objective of making as much profit as possible in case the moment comes to close your business.

Disclaimer:
“The opinions expressed within this article are generic. Mashreq is not responsible for the accuracy, completeness, suitability or validity of any information on this article. The information, facts or opinions appearing in this article do not reflect the views of Mashreq. Mashreq does not assume any responsibility or liability for the same.”

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