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As a business owner, you should always be thinking about your next move. In some cases, that’s your business exit strategy. Even if it’s technically your last move, an exit strategy for small business in particular is something you should keep in mind.
What will become of your business once you’re no longer involved, and how will you come out on top? There are various options for a small business owner when they are ready to exit—and many reasons for that exit.
This guide covers the best way to decide on a business exit strategy, including the many ways you can successfully move on or transition from your business.
A business exit strategy is simply a plan for what will happen when you want to leave your business. It describes and outlines the form that the transition will take. Just like you have a business plan to guide your business throughout its life, you should have one that guides it to a conclusion.
Your business exit strategy doesn’t have to mean disaster or failure, or even imminent action—in fact, many business owners start their business with the express purpose of exiting after a certain number of years. It doesn’t mean they are less committed entrepreneurs. It just means they a have a plan in place.
There are many reasons to want to plan a business exit strategy. They include a planned exit, retirement, health problems, change of interests, an unexpected offer, a new and potentially more lucrative business venture, needing to raise money, or wanting to spend more time with family or take care of a loved one.
Leaving at the right time for you can often be the best decision for your business in the long run. No business is better off with a leader who can’t or doesn’t want to invest the time and effort to run it.
The best kind of business exit strategy is the one that’s right for you and your business—and, perhaps just as importantly, is planned well in advance. When you’re just starting out as a business owner, it’s easy to think only of your business’s growth and future success. But it’s important to be pragmatic from the very start.
Exit strategies are not about planning for the worst. They are how you turn a good situation into a great one, by easing you out of doing business at an optimal time in your life. If you’ve only begun to think about your exit strategy when your business is in trouble, you’ll have a hard time positioning yourself for a soft landing.
This thinking makes it so you can focus on efforts that will eventually lead to the appropriate ends you want for your business.
When you’re just starting your business, this question might seem almost offensive. Yet it’s important to be realistic when creating your business strategy exit plan. Even if you spend your entire career owning the same business, most people eventually plan to retire at a certain age. Have you set up your business to make that a possibility down the line?
Maybe you know that you can only withstand business ownership for up to 10 years. In your eyes, what would you ideally like to happen at that point? Would you still want to be involved in the business even if you weren’t the owner?
These are important questions to answer for yourself in order to make the appropriate plans. It might even be a good idea to revisit how you feel about these questions year over year, as your life and plans evolve.
This, of course, is different for everyone. As much as you might love the concept of your business or the good it’s doing the world, almost every entrepreneur has financial needs and goals playing into their business plans (unfortunately, almost 70% of entrepreneurs don’t regularly save for retirement). Whatever your goals may be, this question will greatly play into your exit strategy outcome.
Many business owners work with consultants or professionals to help them make the best decisions, such as a business accountant or lawyer. It’s also helpful to ask yourself the above two questions first when planning an exit strategy for small business.
John Leonotti over at QuickBooks lays out the following advice: “The planning starts with determining your personal and business goals, and then assessing your mental and financial readiness. After that, you need to identify the exit options that are most aligned with your goals and readiness.”
At that point, you need to attend to “the executable items, such as taxes, deal structure,” and so on. You also need to understand the full value of your company to understand what your options might be.
In short, it’s all about crystallizing your goals to make the best decision for your business at the appropriate time of exit.
If your exit is in the immediate future, you need to choose one plan and stick with it. But if you have the time to plan ahead, it’s a good idea to set yourself up for multiple options. Fortunately, you’ve got numerous exit strategy options to choose from when thinking about the future of your business.
Let’s review some business exit strategy examples:
Even while you’re starting your business, you should at least think about your ideal exit strategy. Hopefully, this article gets you started planning your exit strategy for small business.