Five Common Exit Strategies in Business

Exit from your business
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There is more than one way to leave your business behind – but some options are far more promising than others. You want to generate a strong return on your hard work but, in all likelihood, you also want to see to it that your business is equipped to withstand this change of the guard, and continue succeeding long into the future.

Below, we look at five of the most common ways business owners manage their own exits. It is important to remember that every business is different and that the only way for you to know which option is best for you is to talk things through with an expert. Reaching out to a corporate solicitor about an exit strategy early on is vital, otherwise, you may end up feeling lost at sea when the time comes to move on. 

Selling the business

Selling a business when you are ready to bow out and try something new – or enter into a new phase of life – is a great way to generate a strong return on all those years’ worth of effort (and all that money) you invested into its growth.

As you can imagine, selling a business is not a simple or quick process. It’s something that you will ideally start to think about years before you are ready to leave. You need to ensure that the business has all its ducks in a row (particularly in terms of finances) and that it is prepared to undergo due diligence from prospective buyers.

The sooner you are prepared, the better equipped you will be to take advantage of market shifts and 

Management and employee buy-outs

A management buyout (also known as an MBO) is a favorable outcome, particularly for a privately owned business, when the owner-founder is ready to step away. As the name suggests, an MBO sees ownership of the business pass to its executive employees, who have the experience and passion to continue cultivating the business in your absence.

In the majority of cases, a loan will need to be obtained – but, for businesses with strong finances, the chances of securing these loans are relatively high.

As with a traditional business sale, MBOs take a lot of time. To satisfy prospective lenders, employees will need to do just as much financial due diligence – and, unless you approached them about pursuing an MBO, they will also need to put together a proposal that convinces you to sell to them, instead of an outside buyer.

Business mergers

Mergers are a great option if your business has found success that could represent a major benefit to a competitor. Your business will undoubtedly hold a wealth of resources, client and distributor relationships and key talent that make it an attractive prospect for another company.

Mergers usually pose the most benefit to companies of a similar size, scope, and scale. When there is a major difference, an acquisition is often the better choice.

Passing the business onto family members

If you want the business to remain in the family, then preparing a new generation of leadership in the years that lead up to your own exit is a great way to ensure someone is there to take the baton when the time comes.

The key here is, of course, preparation. While there are benefits to keeping a business in the family, and it is great to be able to boast a multi-generational family-run business, you cannot simply pass the reins over to an inexperienced driver.

Your successor needs to share in the business’ vision – at least to a certain extent – and understand how to keep the business going and thriving through this change of hands. If not, the business’ workforce could lose faith – and, in time, its ability to continue without you could be thrown into question.

Planned liquidation and close

Liquidation is definitely not an ideal solution – and, more often than not, it is regarded as the last option when the business is considered to be in real trouble. Liquidation can be done quickly or gradually, whereby the business ceases operations bit by bit.

Selling all of the business assets will generate some cash, but one of the biggest differences between liquidation and selling the business is that, during liquidation, you won’t see any return on the value of the business’ clients. This means that there is a very low chance of a good return.

The other major downside to liquidation is that the business’ workforce will be laid-off. For obvious reasons, business owners usually prefer to take other available routes and avoid this worst-case scenario.