You love owning and operating your own business and selling it is the furthest thing from your mind. Even so, it’s important to plan for the eventuality of not owning the business someday, whether because of retirement or selling it. There is also the likelihood you could struggle with serious health issues and won’t be able to continue in your present role. Whatever your situation, preparing a business exit strategy helps you cover these possibilities and more.
Start by Asking Yourself These Essential Questions
Before you can dig in and start writing your business exit plan, take the time to clarify your current and future goals. Answering the questions below honestly will make it easier to transition to the next step of planning your business exit strategy.
- How would the decision affect others, such as your family and current employees?
- Do you have current business debt you would need to pay off first before leaving your own company?
- How long do you foresee remaining in business as the owner? Would you consider another role in the company if you wanted to reduce your hours and responsibilities?
- What is your personal budget and what financial goals do you hope to achieve while still running the business?
Remember there are no right or wrong answers to these questions, only what makes sense according to your unique situation.
Step-by-Step Guide to Creating a Successful Exit Strategy
Before you start writing down an official plan, be sure to gather both your business and personal financial documents. Having an accurate account of your funds is crucial to implementing your exit strategy. Next, consider the different exit strategy scenarios and which ones appeal to you most. Here are some common options to consider:
- Family succession: If you plan to pass your business along to one or more family members, make sure they fully understand the responsibilities they would take on and agree with your company vision.
- Selling the business: Your options here include selling the company to a business partner, one or more employees, or a third party. In the latter case, you will need to work with a broker to list your business for sale.
- Permanent business closure: If you choose this option, check with the local city government to determine if you could close your company’s physical location without ongoing responsibility for its upkeep. You will also need to speak with any creditors to inform them of your decision and find out your options for meeting any outstanding obligations. Don’t forget that you can earn some money for retirement or the next phase of life by selling business equipment you no longer need.
Once you have chosen the best option, schedule a time to meet with your investors to inform them of your intent. The months when you’re finalizing plans are the best time to appoint new company leadership and inform your employees of the upcoming changes. Lastly, let your customers and clients know at least a few months before you implement your exit strategy.
For additional assistance with planning your exit strategy, please don’t hesitate to reach out to Counting House.