Exit strategy, Do you need one?
Exit Strategy Definition: The planned exit of an owner from their business.
Most people have a plan on getting into business but never think about how they are going to get out of it. Disposing of your business takes careful planning, consideration and probably some sleepless nights. Don’t worry I’ll be with you every step of the way. Some parts of exiting the business will be more difficult than when you were in start-up mode. Usually there’s only one way to start a business, there are three ways for the business owner to exit the business; selling, passing the business down to family and or closing.
It’s never easy to decide to sell the business that you’ve worked on and in for so long. Here are some common reasons on why you would want to sell your business.
You’re ready to retire and have no heir.
Business partners who don’t get along and have decided to dissolve the partnership.
One of the owners dies or becomes disabled.
Divorce, unfortunately it happens.
You have decided to take your life in a totally different direction and something more fun or less stressful.
Funding, all the money is gone and you don’t know where or why.
The business needs something you no longer can provide.
Usually, you’ll get the most for your company when sales are climbing and profits are strong. Several things affect the timing of a sale. Some of those are availability of bank financing, changes in tax law and the general economic climate.
Sometimes it takes a year or more to get your company ready to be sold. During that time, we will need to:
Clean up the balance sheet.
Terminate insider deals, such as property the company is renting from you or family members.
Make sure all team members are working for a common goal.
Trim excessive benefits.
Make sure you’re current up on all taxes.
Have at least two years’ worth of personal tax information.
So you have decided to pass the business on to family. This can be both the most satisfying of the choices as well as the most frustrating. While it can be exciting to watch another generation take over the reins to the family empire, what needs to be done in order to do that successfully?
Processes and procedures in place and used.
Good business model established (Healthy Gross & Net Profit established)
Chain of command
Will you sell for cash or are you willing to owner finance
Real Estate, does it go with the business or are you going to use rent from property to finance your exit
This is a very short list of things to consider. There are many options on where to go and what to do when going this route. It does take time but it is manageable.
Sometimes, the best thing to do is simply sell your inventory and fixtures, pay your creditors and employees, close your doors, and walk away. Closing may be the best option if your business is failing, isn’t valuable enough for anyone to want to acquire it, or is the type of business that’s unlikely to be valuable without you personally operating it, such as a death in the family and everyone wants out.
I never like option three unless you have an extreme circumstance, I can ALWAYS guide you through options one or two. I can also guide you through option three.