What is your Exit Strategy?

Whether you are an investor or a salon business owner, it is always crucial to think ahead. This also includes considering your exit strategy, which is a planned approach to relinquishing ownership or terminating a situation that will either maximize benefit or minimize damage. For entrepreneurs, this refers to a strategic plan on how to sell ownership. Business owners can actually make a substantial profit if they generate a successful exit strategy. Start by assessing your personal and business goals to identify which exit strategy aligns with your future goals.

Every salon owner needs an exit strategy, because at some point, for whatever reason, it will be time to move on from your business.

The benefits of having an exit strategy in place are:

  • Planned exits are a lot more favourable than unforeseen ones.
  • The longer you withhold investments, the less you’re able to contribute to retirement.
  • Being free to attend to any unexpected health problems without having to stress about what could happen to the salon in your absence.
  • You are prepared for unexpected offers.
  • If you want to move to a new business, you can sell quickly if your exit strategy is good to go.
  • If you find yourself in a situation where you need to raise money quickly, an exit strategy can help.
  • There will come a time when personal time takes precedence, and this will help you be prepared for that.

When thinking about and planning your exit strategy, the two most fundamental questions to ask yourself are:
1. How am I going to get my money out of the business?
2. 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.

This is the ‘close up shop and sell all the assets’, typically at a lower cost, 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. Not to be seen as a bad option, this is a recommended strategy when the time has come to simply move on. If you choose this route, just remember that you might need to use cash to eliminate debts.

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. You can mould successors over time, which will assist in seamless execution of your exit strategy.

Sell your business to Manager/Employees:
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.

Lifestyle Company Exit:
The lifestyle company exit prioritizes the profit of the owner without a clear plan for future expansion. By keeping the business expenses at a minimum, you can retain a majority of the profits rather than putting much into helping the business grow. This works best for a small business, allowing you to dissolve the company when it’s no longer turning a profit. Keep in mind that this generally only works if you have a good revenue stream.

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 goodwill 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, which accepting that your salon is worth as much as it will fetch in the market place.
  • Make sure your house is in order – people want to by 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.

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