Business Exit Strategies For Small Business
Starting and growing a business is an exciting journey filled with hard work, passion, and dedication. You put years of planning into putting the first brick of your business, and leaving that business is the last thing. However, life always has its plan, and there may come a time when you decide to exit your business, small or big. Business Exit for a small business may come to mind for many reasons; retirement, a desire to pursue other ventures, financial need, or to capitalize on the value one created. Unplanned sudden bequeathing never leads to satisfaction. Hence, planning a Business Exit Strategy is crucial for a smooth transition and maximizing returns.
Here we will brief you on small businesses’ different Business Exit Strategies. Remember to weigh all the pros and cons of these below-mentioned strategies, as the business you leave behind is your professional legacy.
Before we get into the details of the exit strategies, let us give you an understanding of one more thing.
What is a Business Exit Strategy?
In simple terms, it is a plan that can protect you, your business and your investors from any uncertain loss when exiting is needed. It is an outline of how adequately you can sell your business investments.
It is better to tweak the business exit strategy according to the market change and business scale.
Business Exit Strategies For Small Business
To consider an exit strategy wisely, ask yourself first, what is more beneficial; a big-ticket third-party offer? Or putting the new gen at the helm?
1. Liquidation
While not the most desirable option, liquidation may be necessary when other exit strategies are not feasible or profitable. Liquidation involves selling off the assets of the business and closing its operations. It’s essential to carefully assess the value of your assets, settle outstanding debts and obligations, and consider the legal implications of liquidation.
2. Succession Buyout
Letting the young gen or a trusted, capable employee carry your business is an ideal exit strategy if you plan to retire. The risk factor here is that things might get messy on pricing conversations, mismanagement, timeliness and much more. Indisciplined running of the business can ruin years of hard work. Hence, immense training of the successor should be considered while opting for this business exit strategy.
3. Initial Public Offering
An IPO can be an attractive exit strategy for ambitious entrepreneurs looking to take their small business to the next level. Going public allows you to raise capital by selling shares of your company to the public. Still, it involves significant preparation, compliance with regulatory requirements, and working with investment bankers and legal advisors.
4. Merger or Acquisition
Never confuse a merger with an acquisition. When you merge, two or more companies transform into one entity. This can be a bit complex as leadership ego might get perplexed.
On the other hand, the acquisition is when you sell your company to a competitor or an investor, and you can walk away with the money; no further headache.
With all the pros and cons, considering M&A for small businesses includes finding potential buyers or merger partners, conducting due diligence to assess compatibility, negotiating terms, and addressing potential integration challenges.
If you have a future vision for your small business, merging can be a better option.
5. Third-party Sell
One of the most common exit strategies for small businesses is selling the company to a third party. This option allows the owner to transfer ownership, assets, and liabilities to a buyer in exchange for a monetary transaction. When considering this option, it’s essential to prepare the business for sale, conduct thorough valuations, identify potential buyers, and negotiate favourable terms.
The other considerations for small business exit
- Time & Market Assessment
- Property Valuation
- Taxation
- Legal regulations
- Emotional Preparedness
Conclusion
Exiting a small business requires careful planning, consideration of available options, and understanding the specific dynamics of the company and its market. BGES, one of Sydney’s leading business consulting firms, can help you guide and assess your small business’s best Business Exit Strategies. Book a consulting appointment today to know your scope.
You can also read our other article: 4 Easy Steps To Develop A Successful Business Strategy.
