Setting up a business…what’s your exit strategy?

MSI -Alec1By Alec Blacklaw, McKinley Plowman & Associates, Accountants, Perth.

There’s one question I have been asked literally hundreds and hundreds of times over the years by aspiring business owners and entrepreneurs – and that is ‘what’s the ideal business model?’

Of course, the reality is that there is no ‘perfect’ business model. The right business model or structure for any business depends on many factors but importantly has to be consistent with what you, the business owner, want to get out of the business in the short, medium and longer terms. So, rather than try and shoe-horn every idea into a single model or structure, what I prefer to do is to air a few key considerations that you can run through when you are looking to get that new business started.

For some a partnership might be the right way to go while for others a single director proprietary limited company might be best; whereas if there a significant number of initial shareholders an unlisted public company will be needed. These are just a few examples out of a multitude of options and while the choices are legion, the more important thing is to have a strong and workable business idea. Once we know what that idea is, it becomes far easier to determine what model, structure or entity type to apply.

So, looking at your business idea, there are some key questions you need to have answers to: have you nailed down your competitive advantage? What is it that gives you an edge against your competitors? Also, exactly who is your customer and how are you going to provide real value to that customer?

These may sound like simple questions, and they are, but the answers you give to those questions will form the bedrocks of your business platform, your marketing and your sales effort.

Another classic area I like to cover when talking through a new business is this: you’ve decided to go into business, you’ve got a great idea and you’ve worked out how your customers will benefit. But have you thought at all about what one day you will need to do – exit the business? For many this seems to be a strange way of looking at a new business (‘how can I exit?’).

The reality though, however far into the future it may be, you need to have a plan and a method in mind as to how you will exit yourself from the business and, more importantly, how you will exit your capital from the business. After all, you are setting up the business to make a living and hopefully provide for a retirement too – so it stands to reason that you need a plan for how to take your money out.

Once you answer these questions, we can start to narrow down the options on what will be the ideal business model and structure for your new business.

Alec Blacklaw is a director at Perth based accounting and advisory firm McKinley Plowman and specialises in advising business owners and entrepreneurs all the way from start-up to exit. McKinley Plowman is a member of global accounting and legal grouping, MSI Global Alliance: Australia & New Zealand. 

For more information contact or call (08) 9301 2200

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