There are a wide variety of ways to exit your business. Some business owners make an escape plan as early as the first year they start building their company. Other business owners near retirement and realize they need to exit their company soon.
Knowing how to exit your business is the first step to doing it successfully. There are various ways that you can sell your business effectively, and there are additional ways you can exit your business without selling it. Below we look at 10 ways you can transition out of your ownership of your business.
1. Transfer Your Business To Your Children
If you have children and they are involved in your business, it is a common exit strategy for them to succeed you. Passing your business on to your child is a great way to keep your business within your family’s control, leadership, and ownership.
Effectively passing your business on to your children is no easy task. Making a succession plan is extremely important. Learn how to transfer your business to your children effectively.
2. Sell Your Business To An Employee
Selling your company to an employee is similar to selling it to one of your children. Do you know their capabilities? Are they familiar with your industry? And does it seem like the best way to sell your business?
For some business owners, selling their business to an employee is extremely effective. If you have an employee who is interested in purchasing your business, is a capable leader, and has the financing, you should consider selling your business to them.
Make sure you get a professional business valuation before selling it to them. A valuation will make sure that you get paid for the full worth of your business and your employee does not feel they are paying too much for your company. Learn more about selling your business to an employee.
Pros & Cons of Selling Your Company To An Employee
There are positives and negatives to selling your business to an employee. The most obvious issue is the work drama. Some employees will be extremely happy that you sold your business to one of their coworkers. However, other employees that did not like them or were also interested in purchasing your business will not be happy.
Work and employee drama might be a small thing to navigate in the large scheme of exiting your business. Preparing your successor and indicating this is a challenge they will face is important when you want to exit your company by passing it on to your employee.
3. Liquidate your Company
If you are trying to exit your business, liquidating is an option. Liquidating can be beneficial for you is if your business is going bankrupt and you need to exit it quickly. On the other hand, if your business is profitable and has a large enough value or worth as a whole, do not liquidate it.
Liquidating your company is one of the least effective ways to exit your company. When liquidating a profitable business, you will significantly diminish the potential profits made from selling your business. Learn more about this by looking at the pros and cons of liquidating your business vs. selling it wholesale.
When you decide to sell your business, use liquidating your company as a last resort. The first exit strategy you should consider is selling your business.
4. Sell Your Business On Your Own
You can sell your business on your own. Not many business owners do this because they do not know how to value their business or market their business, and confidentiality is an issue. Business owners may try to sell their business on their own for a few years. Once that has failed, they contact a business broker because they are ready to exit their company.
5. Sell Your Business Through A Business Broker
Selling a company through a business broker is typically the most profitable and effective way to sell your company. A business broker will help you through the entire process of selling your business.
Since business brokers also help negotiate the sale of your business, they provide beneficial insight into the exit process for a business owner. Having conducted many business sale negotiations, they have seen what makes the most effective transition and exit strategy for a variety of business owners.
The process of selling a business is challenging. Having a business broker with thorough experience will make sure you sell your company effectively. A business broker keeps the sale of your business confidential. A broker helps determine the value of your business, create the marketing plan, and helping with negotiations.
6. Pursue A Merger To Share Ownership Of The Business
If you want to exit your company slowly or are trying to leave specific responsibilities’ within your company, you can try to merge your business with another. Pursuing a merger with another business can be challenging. That is why a merger and acquisition specialist can help.
Finding another business owner that wants to share the responsibilities within their business is difficult but not impossible. Many competitors will merge with this purpose.
Performing a merger might not be a way to exit your business right away, but it can help you take steps towards exiting your company. First, you will exit certain responsibilities. Then, over time you can plan to have your business partner take over your role and buy out any remaining ownership that you might have in the business.
7. Sell Your Stake In The Business To Your Partner Or An Investor
If you have a business partner or investor, consider exiting your business by selling it to them. If there is a board of directors, you have access to a handful of interested buyers who might be able to make your exit from the company smooth.
Since your business partner is the first person you would talk to about wanting to get out of your business, offering your half of the business would make sense. If they purchase half of the business, you can strategically exit your company at the pace you want.
8. Sell Your Business To A Competitor
Exiting your business by selling your company to a competitor might be an effective way to leave your company. A competitor might appreciate the worth and value of your company, so negotiating the sale of your business might be easier.
When you sell your business to a competitor, there will be a much shorter transition process so you can exit your business quickly.
9. Initial Public Offering (IPO) Of Your Business
An initial public offering is a way you can raise capital for your business by offering shares of your private business. Publicly offering your business will essentially take your business from being privately owned by you to being publicly owned.
When your business is publicly owned, the actions of the business will be controlled by the primary stockholders or investors. A board will take on the ownership responsibilities of the business. An IPO can be seen as an effective exit strategy for business owners and founders of a business.
How does an IPO work? An IPO can be risky and requires a large amount of work. Your business must also be qualified by the Securities and Exchanges Commission’s (SEC) requirements. Learn more about an IPO and whether your business qualifies.
10. Don’t Exit Your Business; Instead, Become Its Figure Head
Rather than selling your business, you can hire a person to runits while you remain involved as its figurehead. As a figurehead, you can retain ownership of the business as well as the ongoing profits of your business, and you simply pass a majority of the responsibilities to a company manager.
The benefit of becoming a figurehead of your company is you retain ownership and control of your business. On the other hand, you have much less control of your company and are entrusting its future as well as your own financial future to your employees.
While you can remain at your business in this role, you will not receive the same payout that could fund your retirement. You will also retain a certain level of responsibility.
Exit Your Business With Synergy Business Brokers
If you want to exit your business in the most profitable way possible, consider hiring Synergy Business Brokers to sell your business. Learn more about our services and take the steps needed to leave your business and enter retirement.