There are several ways one may exit their business. Business Owners may want to exit a business they have owned for decades just because they just no longer have an interest. Or a small business owner may “get out of their business” after a short period of time of just owning it a year or 2. Most entrepreneurs and small business owners think long and hard before they decided to buy a business or start a business. So often so little thought goes into an exit strategy. A small business may be the result ones passion or burning desire to provide a certain service or product. A small business can also be and usually is one of the largest asset a small business may own. It can be a passion but it also is an investment. A significant investment. Most investments one enters into an exit strategy should exist before the investment is made.
You buy a commercial property to rent out with the intention to rent it for 10 years, hope for market appreciation and plan to sell in 10 years.
You buy a stock. You buy at $10 a share and plan to sell if stock goes to $15 (unless the company fundamentals change)
You decide to start or buy a business, it gets going and does well- is your plan just to run it forever? Well you cant, because none of us are here forever.
If your plan is to start a business grow and run the business until you are 65 and then sell it- you have a plan and are ahead of most. It is so easy to start and buy a business and spend a lot of time preparing for that acquisition or start up, then get wrapped up in the transition or start-up, then get wrapped up in the day to day, and then one day you get real sick, and you have no one in your business that knows how to run your business, and laying in bed decide that you may need a plan- it may be to late then.
I am currently a business broker based in Florida and find my role of meeting with small business owners brings awareness to the need for an exit strategy. I had owned my own small business for 20 years and realized how ensconced with the day to day one can get with their small business. There are several ways to exit ones business- I primarily work with small business owners looking to sell their Florida business, but observe some of the other exit mechanism and have been personally involved with several of these methods.
These are a few methods a small business owner may utilize to exit a business. Some are good, some not so good.
The Good, the Bad and Ugly Ways to Exit Your Business
- Sell at profit – can include merger with other companies
- Sell at Loss
- Close your doors-bankruptcy, long term negative cash flow.
- Poor Health, Significant Injury, Death
- LBO (Leveraged Buy Out)
- Successfully grow it to such a size and take it public
- leave to children
…or some combination of the above- one could die and leave the business to the children
But when you look at the above list you recognize that some of the exit strategies you choose on your schedule and others are “chosen for you” and you have less control over the time frame. Your plans can change and often do, but I suggest you plan to have a plan.