Business Exit Strategy

Business Exit

It feels great to be the owner of a business. You feel ecstatic and excited while running your company. However, there arises a juncture in many business owner’s life when they look for a transition. This means that they want to hand their business over to another investor or company. A well-crafted business exit strategy plays an important role in such a situation.

Even if you sell your business much later than now, it’s better to make a proper exit strategy for your company beforehand. In turn, you can make a smooth and worry-free exit from your business at that time.

There are certain imperative factors that every business owner should consider while making a business exit strategy for themselves. Let’s take a sneak peek into these factors.

Market Status

This factor includes the present demand as well as supply in line with your company’s services or products. Plus, you must also consider the current marketplace requirements for similar businesses like yours. Also, consider whether the number of potential buyers is minimal or quite a lot.

Needs of the Business

The business owner should consider his or her present needs before making a business exit strategy. Do you want your business to get dissolved or wish to carry on with its operation?

Get a clear answer to this question first. It’s only after that that you can decide whether your company merged, liquidated, or transited to another company through succession planning.

Goals

The person’s potential objectives are an important factor to consider before making a business exit strategy. The owner might want to leave some notable assets behind after leaving the company.

Alternatively, the individual can show some interest in gleaning sufficient profits as well. So, once the purpose is decided, knowing the potential objectives and imperative tasks becomes easy.

Time-frame

The timeline is yet another important factor to consider.

So, zero in on the time limit within which you want to sell your business.

However, the business owner shouldn’t be too specific with this time frame and must make it adequately flexible. In turn, the person can negotiate with his/her potential buyers effectively.

Different Types of Business Exit Strategies

Business exit strategies can be of various types depending on the different needs and criteria of different business owners. Consider this checklist as it familiarizes you with the most common types of business exit strategies.

1. Bankruptcy

This exit strategy leads to the seizure of your assets but absolves your potential debts.

2. Liquidation

It results in the liquidation of any failing business when they’ve to sell off their assets and close their company.

3. Initial Public Offering (IPO)

IPO is such an exit strategy that takes your business to the public, where shareholders buy shares from you as stock.

4. Management and Employee Buyouts

It’s a beneficial exit strategy that lets you move on to more upstanding roles to fill out the imperative leadership designations.

5. Acquires

Acquires lets another company buy your business simply to optimize your in-house team’s talent effectively.

6. Family Succession

Family Succession entails the idea of retaining a lumpsum profit within the family. A person who wants to pass on their company’s assets to a family member or child can opt for this exit strategy.

7. Selling a stake to an investor or partner

Through this exit strategy, you can sell your pertinent stake to a venture capital investor or partner. In case, you’re the sole proprietor of your company, you cannot access this business exit strategy.

8. M&A Deals

A merger and acquisition exit plan allows aspiring entrepreneurs and startups to sell their organizations to certain companies. These are particular organizations that wish to optimize their talent, products, services, and infrastructure aside from expanding their demographics.

Benefits of a Business Exit Strategy

There are many advantages of staying handy with a well-planned business exit strategy. A few of these benefits can be considered below.

A business exit strategy helps you avoid any unwanted dangers and problems effectively. These troubles and hazards tend to occur when you cannot scale up your business and for having insufficient business operation knowledge.
Allows preparation of documentation and legal work in advance in a seamless manner.
Gives you a clear idea about who will particularly show interest in buying your business from you.
A systematically drafted business exit strategy keeps your stakeholders alert and organized in terms of taking the correct steps. As a result, you can transit from your business and hand it over to your buyer properly.

So, creating a solid business exit strategy can always be a serendipitous idea for your business.

This is because exiting your business might prove to be quite beneficial at times for your company. Conversely, it lets you stay aware of the estimated time, value, and impending transition procedure of your business.

Apart from that, you can also know about the prospective growth and development of your company post it’s sold off.

Final Thoughts! Hence, the bottom line is a business exit plan must be the part and parcel of any organization out there. Aside from ensuring a smooth transition for your company, it’ll also let you hand over your business to someone more competent and deserving.