Most entrepreneurs do not have a proper exit strategy

The vast majority of entrepreneurs (74%) in the UK are risking long-term business success by not giving proper thought to their exit strategies, according to business advisory firm, Deloitte.

The survey findings, published in the report ‘Entrepreneurship UK: 2008’, reveal that in 72% of cases the founders are still involved in the day-to-day running of the business, yet 39% have no exit plan in place. Thirty-five percent are simply waiting for an opportunistic approach from a third party.

Deloitte's head of entrepreneurial business, Tony Cohen, said:

“An entrepreneur’s first objective understandably tends to be to create a business upon which to build value. They will often only consider selling that business when first approached by a potential buyer. This can leave them unprepared and at a disadvantage. Having a clear exit strategy in place from the outset may sound counter-intuitive but is, in fact, essential.

“With entrepreneurial businesses, it is vital to plan for the future, growing the value and attractiveness of the business by implementing a clear development strategy from the beginning, including putting in place a strong management team to lead the business following the eventual departure of the entrepreneur.

“Private equity houses are keen investors in family businesses, indeed 62% of family businesses are bought by private equity investors according to the Centre for Management Buy-Out Research.

"Unfortunately the lack of planning results in difficulties agreeing a price, with owners reluctant to give potential investors access to vital financial information. On the positive side, good succession planning through a management buy-out can ensure the family firm maintains independent ownership and stewardship, albeit in a metamorphosed business structure.”

Further Exit Strategy Resources on Bytestart

• Guide to planning your exit strategy.

• Advice on succession planning for small businesses.
• Passing the family business to the next generation - a legal guide.
• Five reasons why you need a business plan.