You’ve put your heart and soul into your business to get where you are today. You are ready to close the book on this chapter of your life and start something new, be it a new venture or enjoy a well-deserved slower pace. The first task is deciding what your exit will look like, and then you can make preparations for that transition.
For those whose business is just beginning or gaining ground, the idea of planning an exit strategy just sounds so negative! But as you ponder that, I remind you of the wise words of Stephen Covey: “Begin with the end in mind.” So begin your business with a clear vision of your desired destination or end, and continue proactively to make it happen.
Think of it this way. Planning an exit strategy need not be impending doom, but instead a plan on how to optimize a good situation instead of the narrow thought of eventually getting out of a bad one. When you think ahead about a graceful exit, you can run your startup while focusing on things that make your business attractive and compelling to potential buyers.
Start with intentions: cash cow or legacy?
Let’s start with the initial intentions of your business because not everyone starts with the same purposes.
Some entrepreneurs start a business as a means to make a good living for their family and build personal wealth. As a bonus, they enjoy their work, which is what inspired their business in the first place. Wasn’t that the original American dream? These business owners don’t think beyond their own needs, for their ambition is focused narrowly on personal goals.
On the other hand, another driven business owner may have a broader vision of their company growing beyond their wildest dreams, enriching many along the way. They start small to test their idea, and as interest and success take off, they will engage in phases 2, 3, and 4, which may introduce new products or services. They may take another path to expand and spread their innovations to more locations. Whichever the case, this entrepreneur is building a legacy empire!
Both concepts are very different, and neither is incorrect. Imagine, though, how different an exit strategy might look for either of them.
Option A: sell to a friendly individual
This option is most attractive to the family business owner. They are ready to transition out but would love to see someone else enjoy the community relationships and stable income that they spent their lives fostering. The friendly individual may be a family member or another person interested in purchasing a business with an already established strong reputation. This ideal buyer has the skills and operational knowledge to be successful.
As the seller, you would have your processes well documented, and vendor connections listed for them pick up where you left off. You may negotiate to stay behind for a defined period to walk the buyer through the standard operations and ensure a level of comfort before you make you exit.
Option B: merger and acquisition (M&A)
If you can’t beat them – buy them. Larger companies find great value in acquiring smaller and successful competing companies and adding their branding. This practice enables them to maintain a loyal customer base and enhance the product and service offering. This type of deal is a win-win situation for both parties. To the business owner (seller), the transition is as fast as a few signatures and handing over the keys. To the acquiring company (buyer), merging is an efficient way to grow their revenue quickly instead of developing a new market organically.
Click here to find out more about qualifies a business to be an M&A transaction.
Option C: make it a cash cow
This particular option often requires all of the planets to align to be possible, but worth considering it happens in your favor.
· Business is in a stable and secure market
· Company has a steady revenue stream
· You have someone that you trust to run it all for you
If you are lucky enough to have this as an option, retain ownership, pay off any remaining investors, and enjoy the residual income. Just keep a nest egg aside because even a cash cow needs the occasional feeding of hay, and keep an alternative exit strategy in case of any of those three planets become misaligned and you’re ready to make your absence permanent.
Option D: initial public offering (IPO)
Going public is exciting and takes a tremendous amount of effort, but can really be a road to riches. This idea would be an option to the entrepreneur dreaming of growing that legacy empire, but it is not for the typical startup in the early years. Between shareholder demands and liability concerns, this will be a very calculated and orchestrated event that could take years to bring to fruition after proven long-term success as a startup company.
Option E: tap out and liquidate
This option isn’t usually a planned strategy from the beginning, but a reality when all else fails and the business owner is ready to make their exit. There are companies that will buy your company for space and equipment to open a different company using some or all of the material for new purposes. Other companies will buy everything and liquidate it all, piece by piece to get a higher return. Either of these methods is a means for the business owner to cash out and make their exit.
Not sure? get an expert involved
To make sure you fully understand the options of getting you the best return for the sale of your company, contact the experts at TransWorld Atlanta Peachtree before you make any decisions. They will complete a valuation of your business and provide you a realistic expectation based on the most current analysis of the local and national market. Our professionals will work aggressively on your behalf through the selling process, maintaining your anonymity until your business strikes the interest of a serious and qualified prospect that is ready to personally meet with you and discuss the attributes and accomplishment of your company. Click here to learn more about our entire sales process, and let’s get started!