Every passionate entrepreneur wants to watch their company reach the heights of success. As much as they are committed to their work, it’s good to have a plan in place if things go south. If you are a business owner, you would understand the importance of planning your next step. Planning an exit strategy is one of such steps you need to take to ensure your better future.
Exit strategies involve a lot of complicated processes such as finding out how much your company is worth with the help of business valuation, finding your successor or whether to liquidate your assets or not. Formulating an exit strategy can be overwhelming. Here are five smart strategies for successful business exits.
1. Management Buyouts
Companies are built on the trust and collaboration of the teams. People work in synergy to achieve business goals, and in the process, they keep on learning how the business works. That means if you plan to exit your company one day, there’s a possibility that your existing management wants to buy the company from you. This strategy can help in smoother transition and increased devotion to your company’s legacy because these people are familiar with you and know how to manage the firm.
Furthermore, as the members of your management are already a part of your company and know you well, they may be willing to involve you in the process. They may want to reap the fruits of your business knowledge and want you to guide them further as a mentor or advisor. It can be a great exit strategy if you are worried about how your company will run forward. You may not need to worry about it as the people who learned from you, who already know the inside-out of business and seek your guidance, will be running your company.
2. Keep the Business in Your Family
It’s okay to keep your company in the family if you want to preserve your legacy. If you plan to find a successor from your family itself, you might have to hand over your company to kids or another relative at some point. It can be a lucrative exit strategy as you get a lot of time to groom your successor over the years. You can gradually include your successor in different business operations, so they get well versed in various processes and emerge as a competent replacement for you.
It’s also essential to be sure your successor in the family can take the responsibilities and stress of business ownership as it might bring a lot of financial and emotional stress into your family. It might feel alluring to find a successor in your family to preserve your legacy; it’s essential to understand that you need to find the right person for the job, or it can affect your company’s future.
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3. Business Mergers
A merger or acquisition involves your company being bought out by or merging with another company that has similar or aligned goals to yours. This strategy could provide flexibility in your involvement or the freedom to walk away, depending on who acquires or to whom you sell your business.
The opportunity to negotiate the sale price is perhaps the strongest feature of this strategy. Before opting for this solution, it would be best to work with a professional company that can help you with the valuation of your business. The business valuation will help you determine how much your business is worth. You can then work on this base valuation and negotiate a higher amount to receive for your business acquisition.
4. Get Acquhired
Unlike a standard acquisition, acquhiring involves a corporation buying out your company to have access to its talented or skilled workers. When companies get acquired, the original company names are dropped, but the employees have the option to continue their work or not. Though you may not retain your legacy in this strategy, it will help you safeguard the interests of your employees as they get to keep their jobs after your exit.
Many times when a company gets acquired, the employees get better pay packages and more benefits. That means as a business owner, you not only ensure your team’s safe future but also give them a little push in their career.
5. Take Your Business Public
Many business owners dream about selling their company for a significant profit to the general public one day. However, this solution isn’t for everyone when it comes to exit strategy for a small business. Initial public offerings or IPOs require suitable business conditions to make it a viable solution. It can instantly make or break your company, and a failed IPO can put a big dent in your company. Even if your firm is profiting, your industry may not appeal to the general public in a way that excites stock buyers, and it will decrease your company’s value.
Exit strategies are not a result of a lack of commitment to the business but are a prudent step towards safeguarding the future of your company and your employees. It is a crucial step that you ought to take as a business owner as it directly impacts the years of hard-work you have invested in the venture. Y Make sure you choose the right exit strategy so you can create a better future for yourself and your team members.