How Will You Go? Establish What You Want Your Exit Strategy to Look Like
When planning for the foreseeable future, sometimes we realize that the future is not-so-foreseeable. Your business could grow faster than you expect, or a some event can set your business back. Either way, it’s still good to know where you want to go and how you will go. Here are some common exit strategies:
Your revenue will be consistent, your growth will be steadily increasing, and your business will look healthy to potential buyers. So you think, hey! Why not sell my business? Selling your business to another party is one of the most common exit strategies. Before selling, it’ll be most important to establish the value of your business. This can be tricky! Make sure you get several opinions and quotes from professionals before taking an offering.
This plan involves someone taking over for you in the event of your retirement. Succession planning can take a lot of time, as you are essentially teaching someone how to run and manage the whole of your business. It’ll be important that you pick your successor long before you plan on retiring. That will give you time to train them and plan for your own retirement. Small business owners often choose to go down the succession route when they have a next generation family member who they want to take over their business.
This is where your company merges with another company to create one, larger business. This will increase the value of your business. However, mergers take time. In order to completely integrate two companies, there is a lot of planning involved from both sides. If you’re looking to exit soon, a merger might not be your best choice.
IPO stands for Initial Public Offering. This involves making your company “public.” According to National Federation of Independent Businesses, IPO makes sense for “profitable firms that have a market value of $25 million to $50 million… In terms of revenue, that’s a range of about $30 million to $50 million.” In other words, through the expenses of obtaining an IPO (lawyer fees, accountant fees, etc.) and the time it would take, this may not be the best exit strategy for most small businesses.
If you’re burdened with debts, this may not be the best strategy. If you are relatively debt free, there is always option of shutting down your business and selling the assets. However, your assets won’t hold the same value as a healthy business, which means you won’t get as much money. If you can manage it, selling you business would be more ideal in most cases than shutting down and selling your assets for a smaller profit.