Friday, December 17, 2021 – 10:00
You may have spent your whole life building your business. Finding investors, finding partners. Hiring vendors and employees. Gaining customers, gaining income. Now that you’ve got it running like clockwork, you need to think about your exit plan. How are you going to ride off into the sunset and retire? What will happen to this enterprise you’ve built?
By planning your own exit strategy with a clear head – before its needed – you can ensure that your plan will be carried out successfully. When emotions come into play, judgement can become clouded and what should be a business decision becomes a sentimental one.
In your exit plan, consider:
- How long do you plan to be part of the business? At what age will you retire?
- What is the financial scenario and expectations? Are there investors or banks that need to be paid off? How is that going to be funded?
- Will you continue to be involved as an advisor, board member or employee? Will you continue to take a paycheck?
- Has your life changed since you drafted the plan? Review your exit plan periodically – every year or so – to see if it still fits your situation and goals. Have you married? Are you having health concerns? Is your industry in trouble? Make modifications as required.
As you formulate your exit plan, here are four typical ways to close a business:
- Liquidation. Liquidation is the process of closing a business and selling off all possessions or reorganizing them to lenders and financiers. Liquidating your business can be done in two ways, closing and selling off all assets as soon as possible, or liquidating your business “in time.” Liquidating a business in time entails paying yourself until your funds run dry, then you close the business. (Note: this can have tax implications – consult a tax advisor.) Prior to liquidating a service, you may want to hire liquidation experts to make sure you’re following the ideal process for selling any residential or commercial properties, repaying all debts, informing employees and adhering to all legal and financial commitments.
- Sell your business to somebody you know. A partner, a family member or an employee. In this scenario, the buyer can finance through the seller or through a bank. Seller beware: You may be tempted to sell your business at a reduced cost, because you have a relationship with the seller. If you do this, you may not recoup the true value of the business.
- Sell the business on the open market. People looking to own their own business may be more likely to buy an established business than to start one on their own – especially if the business is successful and turning a profit. Plus, small-business loans may be easier to obtain for an existing business than a startup. If you plan to do this, spend some time sprucing up your properties and briefing your employees so your business looks attractive and enticing to prospective buyers.
- Sell the company to a competitor or a complementary business. In some cases, a competitor might want to acquire your business – and may want you to continue running it. This is an excellent choice for someone who wants to continue working, but no longer wants the stress and responsibility associated with ownership. Work with an attorney throughout the sale and acquisition to ensure that your role is clearly defined and to determine the fate of your employees.
Ready to begin the process of selling your business? Get a complimentary consultation from Business Seller Center today!