Business Organization – Exit Strategies

Some financial planners focus on keeping your money from you until retirement but at Uncommon Wealth Partners, we focus on helping you leverage your gifts to build wealth you can get your hands on before the magical age of 59.5. Running a business is one of the ways we’ve seen people leverage their gifts to build wealth. That’s why we’ve spent the last few months looking at Business Organization, the less glamorous but necessary work of running a business.

So you’ve built a business and you’ve had a good run, but now you are itching to move on to the next thing, whatever that may be. What happens when you are ready to be done with your business, but you have no exit strategy?

A well thought out exit strategy is an important part of business organization. If you do not have one and have barely thought about it, you are not alone? Nearly 50% of business owners do not have an exit strategy in place.

If this sounds familiar, now is the time to plan an exit strategy. In our previous article, we wrote about succession planning. While that’s one approach to exiting your business, we’re going to explore some exit strategies beyond succession. Because the last thing you want is to do is exit without a plan.

Here are four basic exit strategies:

Liquidation

• Everything Must Go! Sometimes you are just ready to sell off assets and close up shop. If this is a planned transition, liquidation can be a fine strategy. You sell what is of value, then live off or reinvest those proceeds in your next adventure—or probably a little bit of both. Liquidation can become a default when you haven’t thought things through and need to be done. Plan ahead and liquidate on your terms. Understand that liquidation, especially quick liquidation, has the lowest ROI of any exit strategy.
• Over Time – You can also plan and do this over time, with much better ROI. Doing it over time means that you can draw out the profits before you close the doors.

Sell to Family – We covered this option extensively in our previous article on succession planning. Basically, you want the matriarch/patriarch owner and the child or children or other family members involved in the business to be on the same page when it comes to succession. This means having a discussion and putting things in writing. Often it also means working with a consultant who specializes in family business and succession planning.

Sell to someone inside or outside the business – If family members aren’t involved, selling to a well-qualified and motivated employee can be a great exit strategy. It is likely you have worked with this person, so they know almost as much as you know about running the business, especially if you have been intentional about mentoring. If you plan for this and agree on the price and other selling points, this can be a real win-win for both parties.

Put your business up for sale on the open market – This is a scenario that can go a few ways. If your business is not thriving, but a company sees some value in acquiring it, you might get an “offer you can’t refuse” just because you need to get out and don’t have time or resources to right the ship. But this can also go in the opposite direction and result in no offers at all.

For a profitable business, selling on the open market can deliver excellent ROI. Be sure to find a trusted resource to properly value the business, taking into account tangible assets as well as reputation and goodwill, which can smooth the way for a new owner.

Sometimes it’s uncomfortable to think about the end of your time in your business. This is your baby, and it was born out of your gifts and purpose in life. So yes, thinking through an exit strategy is probably not going to be easy. But it can be very clarifying and having a plan sure beats NOT having one.

The point is, you don’t want to be the victim of an exit you didn’t plan for. You want an exit strategy that is in place, in writing, can evolve as things change and that you as the owner are in control of.