Do You Have a Business Exit Strategy?
Most business owners plan to sell their business to fund their retirement. It is the number 1 reason for business owners, followed by burnout and new opportunities. Yet, when it comes time to sell their business, less than half of all business owners plan ahead.
|Deal Size||#1 Reason||#2 Reason|
|$500 – $1MM||Retirement||Burnout|
|$1MM – $2MM||Retirement||TIE: Burnout/Opportunity|
|$2MM – $5MM||Retirement||New Opportunity|
|$5MM – $50MM||Retirement||Burnout|
|These stats are fom an IBBA.org article in early 2017.|
Business owners assume their business is salable, but that is not always the case. By not having an exit plan and understanding the value of your business, you are taking a huge risk. Even if you are not ready to sell your business, you should get an annual estimate value of your business. Lakes Business Group can help. Our agents work with businesses in all industries and can provide an evaluation for your business with industry comparisons to help you properly prepare ahead.
Five Business Exit Strategies
Entrepreneur.com has a article with five primary exit strategies available to most entrepreneurs, written by Stever Robbins. Following is a short synopsis of these five strategies.
1- Just Take It: One favorite strategy of forward thinking business owner is simple to bleed the company dry on a daily basis. I mean pay yourself a huge salary, reward yourself with a gigantic bonus regardless of actual company performance, and issue a special class of shares that only you own that gives you ten times the dividends the other shareholder receive.
2- the Liquidation: One often-overlooked exit strategy is simply to call it quits, close the business doors and call it a day. I don’t know anyone who’s founded a business planning to liquidate it someday, but it happens all the time.
3- Selling to a Friendly Buyer: If you’ve become emotionally attached to what you’ve built, even easier than liquidating your business is the option of passing ownership to another true believer who will preserve your legacy. Interested parties might include customers, employees, children, or other family members.
4- the Acquisition: Acquisition is one of the most common exit strategies: You find another business that wants to buy yours and sell, sell, sell. If you choose the right acquirer, your value can far exceed what would be reasonable based on your income. How do you select the right company? Look for strategic fit: Which acquirer can buy you to expand into a new market, or offer a new product to their existing customers?
5- the IPO (initial public offering): There are millions of companies in the U.S., and only about 7,000 of those are public. If you’re funded by professional investors with a track record of taking companies public, you might be able to do it. You start by spending millions just preparing for the road show, where you grovel to convince investors your stock should be worth as much as possible. (You even do a “reverse split,” if necessary, to drive up the share price.) Unlike an acquisition, where you craft a good fit with a single suitor, here you romancing hundreds of Wall Street analysts. If the romance fails, you’ve blown millions. And if you succeed, you end up married to analysts. You call that a life?
This is a small portion of the article titled “Exit Strategies for your Business” by Stever Robbins