You’ve probably put a considerable amount of thought into developing effective business strategies that will help your company grow. But you might not have thought about a business exit strategy that will set you up for success when it comes time to sell your company and transition out of the business you’ve built.
Whether you’re planning for retirement or gearing up for your next business venture, there are a number of reasons that selling your company might be the next best move. It’s important to consider whether you have a viable plan in place to ensure a smooth and secure transition of your assets as you move on from your business toward your future goals.
There are tangible benefits to preparing an appropriate business exit strategy ahead of time. Planning ahead can help you figure out how you’re going to transition your assets, and how much money you’re going to get out of your company; it also might mean making more money from an eventual sale. Careful consideration of your financial goals and your future level of involvement in the business are key in determining which exit strategy is best.
Acquisition
If you think that your company is positioned for a buyout, then preparing an exit strategy based on acquisition can provide maximum profits and also give you the opportunity to remain involved in the business. With this strategy, you’ll be able to negotiate the price for your business, but another thing to keep in mind: there is the possibility that once your company is sold, the buyer will close the company’s doors and lay off employees.
In order to set your company up for successful acquisition, it’s important to concentrate on potential buyers and plan your strategy in advance so you don’t miss the right opportunity to sell. It’s critical to consider who’s capable of purchasing your company so that you can target these potential buyers, while not becoming so specific in your view that you limit the interest from other buyers.
Preparing for acquisition might be the most lucrative opportunity in front of you; if you’re able to position your company as a group capable of providing unique solutions, you might spark the interest of multiple buyers and boost the valued price of your company to new heights.
Continue The Legacy
Many business owners have hoped to one day pass the business and legacy they’ve built on to their family and heirs. If you can manage to keep your business in the family, you’ll have power over a number of decisions when it comes to the terms of your departure.
One advantage of keeping your business in the family is that you have the ultimate say when it comes to choosing a successor. You might also be able to work out some situation where you can continue participating in the business in some advisory role.
As you develop your exit strategy around passing down your company, It’s important to consider the relationships that your successor has with current clients and how your clients will feel about the decision. Another aspect to consider is the complications that can arise from merging family and business relationships.
If there is someone in the family that has the capabilities to continue pushing the company forward, then maintaining ownership of your business within your family can be the best way to ensure an effortless transition and continue your legacy.
Management Buyout
It makes sense that the people who have helped you grow your business might be the ones best-suited to take over operations of the company. Selling your company to your employees can make for the most seamless transition of ownership and has potential to foster a sense of loyalty around your business’ future; often times, members of your company are equally invested in the vision you have for the company.
Internal members of your company may not have the capital required to purchase ownership and often times businesses struggle after changing ownership. This strategy might also provide the opportunity for your continued involvement in the business as the company adjusts to the change and communicates these changes with existing clients.
IPO
One of the most trying strategies involves taking your company public through an initial stock offering. It may take years before business conditions are well-suited to make this exit strategy a viable option. Even while your company is achieving success in the industry, public perception of the industry will ultimately dictate the value of your company.
Taking your company public includes the opportunity for big profits and can be extremely lucrative, but the process is usually long, expensive and in the end, puts your venture at the mercy of the shareholders. These shareholders might want to use profits to expand the business rather than cut you a larger paycheck, and as a public company, you will face strict compliance and reporting standards.
Liquidation
Selling off your assets and closing your doors is likely to be a tough decision for any ambitious entrepreneur, but it may be the simple and straightforward solution you need. If you’re considering this strategy, it’s important to note that you’ll still need to payout shareholders and creditors before taking any money home. You also might start thinking about practical ways to prepare your business for new ownership such as auditing books and improving existing systems.
The downside of this approach is the commonly low return on investment and the risk of losing valuable business relationships.
One of the most appealing aspects of this strategy is that it allows business owners to make a clean break from their company. Because liquidation is final, it may give you the freedom you need to concentrate on your next project and you won’t have to worry about transitioning control of the business.
About The Hatteras Group
The Hatteras Group is a collaborative team of professional merger and acquisition advisors who create options for their clients to grow and sell companies in the middle market. We lead business owners as they navigate the complex and often emotional process of selling a business.
We represent owners who are selling their businesses, lead proprietary acquisition searches, source equity and debt, and provide business valuation services, generally working with companies whose annual revenues are $5MM to $100MM. If you ever have questions about the process to sell your business, or if you would like to explore the M&A market and plan for an eventual sale, then please contact us for a call or meeting.
