Do you have a business exit strategy? What if I told you that you should’ve begun crafting it the day you opened the doors on your company? Not as a kind of preemptive eagerness to leave, but as a way to guide the trajectory of your leadership and the company at large. In addition, if you intend to have outside investments, you must formulate an exit strategy. The UBS Q1 Investor Watch Report, “Who’s the boss?” reports that 48% of business owners who want to sell don’t yet have a formalized business exit strategy. That being said, you want to make sure that you do not make a business exit too early in the game, and lose out on the profits that could follow. Your 30 million dollar company could flourish into a 500 million dollar company, and you don’t want to tap out too soon.
Spearheading a company is accompanied by a kind of thrill; it can almost be likened to raising a child. You devote yourself to its betterment and growth, watching as it matures and make strides. But new opportunities and ideas arise that may incline you to turn your gaze elsewhere, perhaps to a new business venture, career, or a hard-earned (potentially early) retirement. Like any phase in the life cycle of your company, your business exit must be thoughtfully conceived and well-executed.
If you know where you’re headed, you know where to steer the reins. That being said, here are four ways to maneuver your eventual business exit and hand the reins off to someone else:
Merger and acquisition – “When bordering companies have complementary skills,” says Mark Zwilling for Entrepreneur, an M&A may be just what the doctor ordered. Handing the company off to a larger player who sees its merit and complementary nature may be a smart move as you plot your business exit. If you feel confident in the abilities of the larger or equal player to manage the business competently, are pleased with the sum you’ll end up with, and feel it reflects the value of the company you’ve built, this may be your best option.
“Run it dry” – If you are in good shape to settle your debts and are bringing in steady cash flow, one strategy you may consider is running your business “dry,” a kind of antithesis to business growth that can still end happily for all involved. Rather than investing your profits in measures to grow the company, funnel it back to yourself. Raise your salary, consider personal bonuses. So long as you settle your debts and make considerations for the increased tax liability you take on, you are on track to close the company doors and walk away content with the outcome.
Selling shares – If you are a partial owner, selling shares may be among the cleanest ways to orchestrate your business exit. You can sell your equity to someone within the company or outside of it, after consulting with partners and determining the best move.
Sell outright – Provided you find the right buyer, you can sell your company outright at which point you could potentially cut all ties or negotiate for equity.
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