How to Go About Making an Exit Strategy for Your Business | Business Broker in Southlake, TX
There are two types of people in this world: those who plan everything beforehand, and then there are those who let the time handle all. However, when it comes to business, both types of people cannot leave everything to time only. There are certain things, which you need to be prepared for beforehand. Sometimes certain inevitable decisions will be too time consuming in the end and you might end up making the wrong choice.
Having an exit strategy for your business is among one of those certain decisions we are talking about.
When starting a business, it is highly unlikely that anyone would be worried about how it is going to end. Nobody starts a business with the prospects of closing it someday. No one thinks about shutting it down and wrapping it all up. It simply seems like an impossible thing, which is why oftentimes, people do not have an exit strategy ready for their business when the time comes. Why should they after all, they just got started, their business is blooming – what is the need then? However, things are prone to changing even before you can blink. There might come a time in your life when some of your personal decisions will be directly affecting your business. You might come at a point where you will have to consider choosing a different path and shutting the business down. But would you be able to do so if you don’t have a successful business strategy? It is quite common that people never think of it like this. That is where they go wrong.
Here are some considerations that will help you put together a successful business strategy.
Understanding What is an Exit strategy?
Always start from the basics, what exactly is an exit strategy? People often think that an exit strategy is only needed when you have failed to do the business right, however, that is not true. It is equally important to have a strategy even when you are deciding to leave the business for any reason other than simply failing. It can mean that you are only moving to the next phase of your life – nothing negative about it.
An exit strategy means a plan that you will execute when that day comes. This includes the things that you will do, how you will proceed with the decision, and how you will make the transition.
You have many options when opting for an exit strategy;
- You can sell your business to any other company who is willing to buy.
- You can hand it over to someone else who is willing to invest in it, probably a private firm.
- You draw out your shares and let the other partners take over the business.
- Hand it over to a family member.
It is important to note that each of these choices have their specific advantages and disadvantages.
Reasons You Might Need an Exit Strategy
Now, let us look at the reasons why you might need an exit strategy, so as to make it clear that it is not something that you will never need.
- You have gotten old and it is time to take rest – retirement!
- Maybe your health condition is not allowing you to run a business.
- You have grown out of the feeling, passion and drive that made you start that business
- Your interests have changed – you want to open a private plant nursery instead.
- You have decided to start something new
- Urgent need of money for something bigger
- Change of lifestyle
It will only be overwhelming in the end if you are not prepared beforehand. An exit strategy is a simple way of being ready and preparing your school bag before going to bed.
Things You Need to Ask Yourself
You need to set the goal now. Once you have decided that you are leaving the business, you need to be sure that what is it exactly that you want for your business and where do you see yourself going from there. Every strategy has its advantages and disadvantages. Before choosing a strategy, you need to think about the other people involved in it. How that decision will affect the lives of those who are part of that business or indirectly related to it.
You need to decide if you want some stake in the business even after leaving it, or you would like to sell it all off and maximize your gain, or let it remain in the hands of someone else to see it flourish.
All these are big and important questions which you need to answer before you finally take the steps. While speaking to the other members of the business, you will need to be as considerate and sensitive as you could be. You will have to show them the positive side of it, how life has more to offer to them and how there are more opportunities to come. You need to make them feel like there is nothing to panic. The best way to do this is to let them be a part of all the important decision making so they would know what is actually happening, and while they do so, they will have time to prepare themselves for it. It is never ideal to keep the employees or your partners in dark – they helped you build what you have and they are equally a part of it.
Once you have decided which way you will be taking out, there are few things you need to tie up. First is the valuation of your company. You need to know where your company stands and what its worth is, so you can price it fairly. After that, you will have to sell of all the non-core businesses, cash in all the accounts receivables, and pay off all the liabilities, both on and off the balance sheet ones. Moreover, if your personal finances are being handled by your business, then get them separated as well. The last step is to get a team of professionals to take the procedure from there.