Starting, growing and running your business requires vision and perseverance. But many business owners often forget a crucial step of their business plan: an exit strategy—a plan for what will happen when you want to leave your business. For many, selling can be a great strategy for both creating wealth and successfully exiting a business.
Below, we walk through how to prepare and understand your options for selling your business as an exit strategy that will help achieve your vision for your future.
1. Start Preparing Now
Start by asking some important questions regarding your future:
- Do you want to stay involved with your business forever?
- What are your financial goals?
2. Know Your Options
Next, understand the various options for selling your business. Here’s a quick overview below:
- Keep Business in the Family—this allows owners to choose their successor and remain emotionally invested in the company; however, this also may be emotionally stressful for some.
- Mergers & Acquisitions—this option allows for a clean break from the business, and owners can negotiate terms, price, timing and details of their exit.
- Acquihire—think of this as an acquisition that protects employees. This option allows owners to negotiate terms, leverage more profit and better outcomes for employees and make a clean exit from their business; however, this can be time consuming. Owners should also prepare to give up the “legacy” of their business.
- Employee Buyout—owners can hand off the business to experienced employees who they know and trust. It also allows owners to keep some legacy intact.
- Take It Public With an IPO—this option is the most likely to earn a substantial profit; however, the process is extremely difficult and rare for small to medium-sized businesses.
- Liquidate—this option completely closes down a business, which can be simple and straightforward; however, this won’t likely result in the biggest profit and can be emotionally difficult to sever ties with all employees, customers and partners.
3. Next Steps
Create a plan! Work with a professional, such as a business intermediary, accountant or business attorney to implement an exit strategy as part of your business plan. This will help to ensure you are managing taxes correctly and can understand the true value of your business so there are no surprises when you’re ready to sell. Remember, if you have time to plan ahead, you can allow for multiple exit strategy options to give yourself flexibility in the future.