One of the most often overlooked aspects of owning a business is what you are going to do when you plan to retire; or your exit strategy. This might be something you need to think about before you even open a business, so you can tailor your business model for a smooth transition when the time comes. If you’re already up and running, it’s never too early to start planning for the future. Here is some basic info about the 7 most common exit strategies, and how to decide which one is right for you.
By far the quickest and simplest way to exit the business world is to simply liquidate all your assets and close. It’s also one of the least lucrative, as there is a lot of value in a business that isn’t just in assets. Client lists, customer relationships, these things will vanish the minute you shut your doors. But if you’re looking to get out quickly and easily, this may be the way to go.
Wind it Down
If you don’t have plans to pass the business on to a family member or previous employee, you can try the slow burn; start drawing more of a salary for yourself, transferring that wealth into retirement planning. During this time, you can start to let your customer base and employees know, so they can start seeking services or employment elsewhere. As they leave, the cost of your day-to-day operation, as well as your income, will slowly die out as well.
If you’re self-employed or a freelancer, it may be a good idea to sell your business to someone in your field that you trust to continue to provide the same quality product or service that you have been providing. It’s a good way to thank the customers and clients you’ve grown relationships with by transitioning them to someone new, and not leaving them stranded.
Leave it to Your Family
If you’ve invested years of your life into building a legacy, it may be that you’re planning to leave the business to your kids. This can be a great way for you to not only make sure that your business will continue to thrive long after you’re gone but also to provide for your children’s future. Just make sure they want to take over, or your business and your family will suffer once you hand over the reins.
Having a loyal manager who has spent years investing in your business is often the next best thing to passing it on to your kids. Find out if there is anyone currently on board that might be interested in taking over when you decide to leave for good. This is a great way to keep your legacy alive and protects current employees from having to deal with the trauma of losing their jobs and having to find new work.
Merger or Acquisition
This is the best way to make the most of your business value, though it is one of the more difficult exit strategies. Finding the perfect business to merge with can result in the biggest payoffs because they’re not just banking on your current assets, they will often pay you well for the value that they think your business will bring to them in the future. Make sure you prepare before you decide to seek an acquirer.
Initial Public Offering (IPO)
This is the most difficult for a small business to pull off and requires the most planning and up-front costs. Of the millions of businesses in the US, only about 200 of them successfully go public each year. Unless you have the investment banking expertise and a network of high-level professionals to help, this isn’t the option for you. If you are still considering it, educate yourself.
Whatever your business is, remember that part of running a successful business is planning how you are going to leave when it’s time. Researching exit strategies now will help you get the most back when it comes time to move on.
Rachel is a mother of 2 beautiful boys. She loves to hike and write about traveling, education, and business. She is a Senior Content Manager at NYBizDb – an online resource for relevant business information.