Which Exit Strategy is the best for you and your business?
You may not think planning your exit from your business is important but the earlier you make plans, the better it will be in the long term, solid exit strategies can help you maximise the value you get from potential buyers or investors.
An exit strategy details how you are going to get money out of your business and how much money you will personally get. Having a well thought out strategy defined in advance will help you put plans in place, which will provide you with a degree of control over your future. There are many exit strategies to consider, such as:
Keeping the business in the family
Keeping your business in the family may be the most appealing choice (if selling to family is an option) because your legacy will continue to live on and it provides your children with an income. It will also provide your existing client base with stability and reassure them that the business will continue to function in the same or similar way, assuring them they will receive the same level of service.
Selling your business to existing staff
Selling your business to existing staff members can also be attractive, because they already have a great understanding of the business and will share the same level of passion for your business as you! They will also have the desire and drive to make the business succeed. It can also increase other staff members moral and motivate them to work harder knowing there’s an opportunity to progress within the firm!
Selling your business in an open market
Selling your business on the open market means you will potentially have more chance of selling it for the asking price! The assets associated with your business and your goodwill will also be considered when the sale price is agreed. However, selling your business on an open market means there is no guarantee when the business will sell, so this may not be the best option if you need to sell the business during a specific time frame.
Selling to competition
Selling your business to a potential competitor could be extremely advantageous for both parties, not to mention highly profitable. Your competitors will be more likely to acquire your business, as they may wish to expand or simply buy to eliminate their competition!
IPO (Initial Public Offering)
IPO is the process by which a private company can go public by sale of its stocks to the public. This option can be sometimes highly profitable but the process of selling to the public can be a lengthy process. Also, public companies must meet with higher compliance standards and as an owner you may be potentially liable and/or prosecuted if there are any previous accounting discrepancies or failures in disclosure.
Whilst liquidation is not something you think about when starting a business, sometimes circumstances happen outside our control and closing your company may be your only option. Liquidation usually occurs when a company is insolvent, meaning it cannot pay relevant obligations. Your assets of the company will be sold and the proceeds used to pay as many creditors as possible.
You ultimately need to decide which exit strategies will be best for you, as you need to think about what suits your personal needs and what your ultimate goals are. If you want to walk away from the business with as much money as possible then selling to an external party may be the best option. If however, you would like to leave a legacy then keeping the business in the family may be more suitable.
Whichever exit strategy you choose, implementing a plan as early as possible will ensure you maximise your return on investment.