So much emphasis in the business world is put on building business that we often forget the other end of the story. Any ambitious entrepreneur ultimately aims to have a business that they can sell, pass on or otherwise remove themselves from. What’s your exit strategy?
The most common form of exit strategy may be the sale of the business, but there are many other opportunities that present themselves. It’s hard to plan for them all, but it is at least worth thinking about what you would do if any of these situations were to occur.
Types of exit strategies
Depending on your circumstances, the options are wide open when it comes to exit strategies for retirement:
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- Passing on to a family member
- Selling on to existing management
- Transferring control to management, but keeping ownership
- Taking a part-ownership of the business as a silent partner
- Selling to a competitor
- Selling to a new owner
- Dismantling the business and selling assets
The choice you make will depend on a mix of what you need for your retirement, and what you want to happen to the business in future.
It’s important to be aware of the pros and cons of each exit strategy. If you decide to transfer control of the business, you need to be careful in your selection. Keeping it in the family may sound attractive, but you need to be certain that your family member can handle the business. Retaining part-ownership can also be a complicated matter, and selling the business to a competitor leaves the business itself vulnerable to exploitation. The legal and practical angles of each option should be carefully weighed.
Preparing multiple options can be a good approach, particularly if you’re not near retirement. Have your business valued regularly, and keep an eye out for potential successors.
An Exit should be Part of The Plan
Retirement isn’t the only occasion that requires an exit strategy. Sometimes, a business owner needs or desire to pass on the reins. A good business plan should have an exit strategy component, even if it’s a safeguard should the business fail. The contingencies that absolutely must be planned for in any business strategy include:
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How are debts to be paid, and who is responsible for the various areas of the business?
Should you need to dismantle the business, what can be sold and where will the money go?
Ideally, you will also have an idea of what you would do if a purchase offer comes up, an opportunity to merge should occur, or a partnership becomes a possibility.