It’s amazing to me that often business owners put so much time and energy into their business that they forget to plan an exit strategy to get their money back out of the business.
Here are 5 Business Exit Strategies to consider:
1.) Sell to a key employee, partner or friend
Often in this kind of sale, the seller finances the sale and lets the buyer pay it off over time. Selling to someone already emotionally attached to the business preserves somewhat they way you ran the business and you can phase yourself out of the business over time.
Willy Wonka handed off his empire to a loyal boy who was a Wonka customer and a dedicated fan of his products. This is another option. Sell to a loyal customer.
2.) Sell to the Competition
Who ever thought you would actually be glad you had competition. Pick out 3 or 4 of your competitors and propose for them to buy you out – forge a partnership. At the end of the day purchasing your business should strengthen theirs.
3.) Groom a family member
It would be great to keep your business in the family however there are some draw backs in doing so. Sometimes a family business creates animosity among family members and the business suffers. In addition to having a first row seat in watching your once well run business decline, you may never really “get out” of the business entirely.
If you choose to go this route, exit planning is essential to preserving the business and your family.
4.) The Acquisition
The acquisition is the most common exit strategy. If you are thinking of acquisition for your exit strategy, make sure the business is worth something without you in it. Also, have a team of experts to help you in the planning (i.e. a business valuation expert, a business broker and a business coach).
The plus side to an acquisition is that if you can demonstrate value an acquirer may pay more or you may get multiple offers creating a bidding war where you can increase your price.
Simply call it quits, close the business and call it a day. After all everything comes to an end right? Well – simply put you can go this route, but it’s kind of a waste. Your client lists, reputation and business relationships can be very valuable and liquidating just leaves money out on the table. To invest so much time and energy into creating a viable business to then turn around and walk away may not make the most sense, but it happens all the time.
If you know that one day you plan to just walk away from your business -rather than investing money to grow your business, give yourself a sizable salary and bonus each year. Be careful though – the way you pull the money out of your business may have negative tax implications.
For example, a high salary is taxed as ordinary income, while an acquisition could bring money in the form of capital gains. Without careful long-term planning, you may end up pulling out money now that you will end up needing later.
Looking for more business exit strategies and advice?
Our business coaches can make sure you get the most value out of your business. In fact, we have helped several business owners successfully sell their business. Let us show you how to do the same…..