As every business owner understands, there comes a time when they need to consider the best way to leave the business. Whether your intention is to sell, merge the business with another corporation or simply close it down, it is advisable to have a clear exit strategy. As with all good things, there are positives as well as negatives for each one of these options, hence the need to comprehend the different types of business exit strategies and business exit options so as to pick the most appropriate one based on your objectives and circumstances.
Advantages of Selling Your Business
Emerging from the above, one clear business exit strategy is to sell one’s business and retire. Here, an owner transfers his or her interest in the business to someone else and receives money in return. This course is especially appealing for business owners who face the desire to take profit and look for other activities or simply decide to retire.
The selling of one’s business includes conducting a thorough evaluation of the business which in most cases involves financial advisors valuating that operation. Step one has thus been completed because people have agreed on the price which seems fairest for the business. The seller must sell his or her business to someone whether an individual another company or a private equity firm. There should be desirable legal documentation to guard against problems that may arise later.
Merging with Another Business
It is a common reason for an exit for businesses seeking stronger strategic advantages through an integration with a bigger or marrying company. By use of this method, the proprietor is able to leave the business but has the assurance that the business will be running in a better way most likely externally too.
Mergers can help the businesses which wish to have the exit and still have some continuity or growth after an exit. The most important factor to success in any merger is identifying the right partner who is going to share the same vision and objectives as yours. In addition, monetary aspects of the merger cannot be ignored as the terms of the merger would have to be favorable to both parties.
Closing Your Business
In some situations, the option of closing the business may be the only none troublesome exit strategy. This option is preferably utilized when the business is not turning in any profit or when the owner incapacacitates if not finds a comfortably appropriate willing buyer. The closure of a business consists of the activation of asset dissolution, debt extinction, and resolution of any encumbered legal duties.
Although closing might look to be a direct option, still there is a great deal of caution that has to be exercised to ensure that all loose ends are neatly done as they should be. For instance it is very important that there is engagement with employees, creditors and other stakeholders in order to reduce turbulence and litigation.
Other Exit Strategies
Apart from selling, merging or closing the business, the owners may have the following preferences;
Initial Public Offering (IPO): This route of seeking for investors may yield better returns for bigger companies at the expense of great preparation time and increased risk.
Management Buyout (MBO): This includes dispossession of the Master franchise to the current business managers and is likely to be pricey.
Employee Stock Ownership Plan (ESOP): This approach enable employees to purchase ownership interest in the company and therefore gradually phase out the owner while ensuring the management skills of the venture remain intact.