Every entrepreneur should always have an exit strategy as a part of the business plan, even when starting up. You never know when the business could take unexpected or negative turn and you need to have an efficient exit strategy to share with potential investors, as they focus on both the short- and long-term plan. The following explain some different long and short-term exit strategies for entrepreneurs.
Long-Term Exit Strategy
Focus on yourself:
This strategy works specifically for sole proprietors. If you foresee the closing of your business in the near future and plan to exit, it would be a profitable decision for you to start paying salary and bonuses to yourself before you plan to close. It is also important to gradually start paying off all the remaining debt. Therefore, when the time comes, you have secured yourself financially, closed your books and liquidated your assets. This strategy would also help you to avoid paying large amount of taxes all at once.
Sell your shares:
Most entrepreneurs will own shares of their business if it is well-established. This strategy works almost with any type of business and works especially well with partnerships. When you are ready to retire, you can sell your equity to the existing partners, or to a new employee who is eligible for partnership. If you sell all of your shares, you leave the firm clean and you gain the earnings from the sale.
Liquidate your assets:
This is a simple approach in which you sell everything at the market value, which would help you generate revenues to cover your debt. Since you are simply matching your assets with buyers, you probably will be eager to sell and therefore at a disadvantage when negotiating.
Short-Term Exit Strategy
At times, merging two businesses create or add more value than each business has on its own. This is due to the expertise and skill sets that each business brings to the table. A merger can be your ticket to exit, if the head of the other party decides to stay on. However, if you decide to continue having some involvement in the business, there are always options for advisory roles.
There always exists a similar business as competition that would benefit from acquisition. Being open to acquisition could potentially be a profitable exit strategy. It can put you at an advantage during the negotiation process. To move forward in this process, make sure the offered sale price meshes with your business valuation. If you choose your acquirer wisely, the value of your business can far exceed what you might otherwise earn in a sale.
To learn about different types of exit strategies and how to make a decision, visit:
If you have an Exit Strategy that worked for you, please share your experience with us. What worked well… what would you do differently?
Thank you for reading, and until next week, stay WISE!