When you own a business there are many aspects to think about: your business goals, your day to day operations, your business plan and what your exit strategy will be. A well-written exit plan explains how the owner will be paid for their sweat equity. It also involves a set time as to when the exit strategy will take place. Operating without an exit strategy can easily create stress; in fact, business owners often get caught running the business indefinitely. If you are a business owner without an exit strategy, it’s time to start the planning process.
Keep in mind these critical factors that can affect your timeline:
- Choose a date: How many more years will you work your business? Even if you are unsure select a potential date anyway. Revisit your exit strategy annually and adjust according to business objectives.
- Put all your ducks in a row: Leave yourself enough time to prepare for a sale. The closer you get to retirement the more important this sale date becomes. Be prepared! Strike while the iron is hot.
- Choose an exit strategy: The more elaborate the exit strategy, the longer it will take to finalize the deal. It could take several months or several years. An investment banker experienced in M&A (mergers & acquisitions) can explain the options and time needed to get different types of deals done.
Common exit strategies include:
- Run the business dry: Settling debt and taking extra cash out to create retirement savings.
- Liquidate: Sell off all assets and settle debt.
- Sell Shares: this is often done in partnerships.
- IPO (initial public offering), where you offer shares of the businessfor sale to the public.
- Passing the baton: where the business is to be inherited by a family member.
- Put up For Sale: Creating a for sale listing for the business.
Whether you’ve been in business for 5 years or 50, an exit strategy should be included as a key part of your overall business plan. It will provide you and your business a definitive plan that will ensure you stay on track and maximize the value you have accrued. #businessexitstrategy