Business exits sound easy. They look easy.
But they are far from easy.
On the surface, complex business activity may have come to a halt, making the whole process seem easier. But on the inside, you (i.e., the business owner) are dealing with an entire storm of questions.
Well, if this rings any bells for you, then this post might exclusively be for you. Here we address the top seven practical questions that a business owner ought to ask himself or herself when exiting their business.
Top 5 Exit Strategies
Fundamentally, to have questions about anything at all, or let’s say to evaluate anything at all, you need to have a sound understanding of what it is. For that very reason, let us understand what an exit plan means and what are your possible options?
By definition, an exit strategy refers to a line of action of a plan that a business owner aims to follow when closing down the business. Now, this closure may not mean complete closure. It may as well mean the closure of business for the owner or the termination of his authority. At times, exit strategies simply transfer the authority of business to someone else.
According to this definition, there are at least five different strategies that you can consider. These include:
- Initial Public Offering
- Selling the business to an acquaintance, friends, or family.
- Merging two businesses
- Acquisition (selling your business to another company of the same domain)
You – as the owner of the business, need to settle for one of the above. However, when choosing the best strategy for your business exit, it is best to ask yourself the following questions.
Video: Exit Strategies for Small Business Owners (2021) | Strategy Leaders Inc.
1. What’s the plan?
First, decide what you are going to implement as your business exit strategy. Are you going to sell the business directly? Or, transfer ownership first? There are multiple ways to exit the business successfully and efficiently.
So, before you make the final move, sit down and research all the options that you have. Some of these might be profitable, while others might be too time-consuming. Evaluate and select the one that fits your situation ideally.
2. When will the plan come into effect?
Now that you know the exit strategy and how it’ll work for your business. Decide when you will put it into action. When will you finally exit the business? And would it be profitable?
Timing is quite crucial. You should plan the exit when your business has grown and matured. This way you could get a better value and price for it.
Purchasers might bring down the value if your business is in its early stages or has not yet fully explored its potential. So, growing your business is quite essential. Besides, ensure you do not wait on the business for too long that the prime time for selling has passed. As a result, the business value decreases with people showing reluctance in purchasing it.
3. What happens once the exit comes into effect?
Most of the owners spend 90-percent of their lifetimes getting the business up and running. It’s difficult to invest so much time in something, nurture it, watch it grow, and then leave it behind as if nothing ever existed.
However, the sad truth is humans’ age. One cannot always have the stamina and strength required to maintain the business, keep it consistent. So, what will you do when your business owner's life ends?
If you are firm about leaving the business, then, my friend, consider this question seriously. If you don’t, then the sudden burst of freedom and carelessness that comes after handing over your business to someone would be followed by emptiness.
One day, two days, three days; Soon you will start feeling an urge to go over to that office, look at the stats, and get your business life back. The hollowness, purposelessness would be too much to swallow. You would probably end up quarreling with your loved ones or sulking at the bar.
Now, do we want such a miserable time after leading a dignified business owner’s life? Certainly not!
So, before you exit the business, get down to work and craft a list of all the things you would want to do. Would you like to explore a new destination or start a new hobby? Would you like to learn a new language or practice a much-loved sport?
Or, perhaps, you could even start a new venture as a content creator on YouTube or Instagram. It will put your business skills to good use and help you keep yourself productive
4. Will you have any degree of control or command in your business?
An important question that will help you lead your life peacefully after exiting the business is; whether you want any amount of control in your business.
Knowing the figures about your business value might make you confident, almost tempted, that you should sell your business. But, hey, how would you feel watching it soar to the height of success without your name in it?
If you feel easy with the idea, then go ahead. You’re ready to leave it behind. But, in case the very thought makes you uneasy, then it’s time to evaluate whether or not you want to control the business once you exit.
Take time to negotiate with the new purchasers and settle down on terms that provide you a fair share in the business. It could be as little as the new party seeking your advice in important matters or as big as fulfilling a responsibility.
5. What happens to your valuable family-like staff?
When leaving your business, you don’t only have to think for yourself, but you also need to consider the fate of your valuable staff. And this is essential for both small business and large-scale businesses. Whether it’s been years of working together or a few months, you are responsible to your people. They depend on your business for earning. Hence, you need to sit and discuss the scenario with them. Help them wherever possible. And at least inform them about the closure about 2-3 months earlier.
6. What’s the current value of my business in the market?
In case you aim to generate sufficient profits by the immediate sale or closure of your business, then your business’s worth is your prime concern. Hence, consider the current profits generated and evaluate the current value before proceeding any further.
7. Is your business ready for the transition?
Secondary to the previous question, if you wish to generate maximum profits, you need to see if your business is ready for the transition. You have to ensure this by sorting your records, maintaining your documents, clearing previous debts, and presenting a complete clean ready-to-go business unit to the third party.
You know, there’s one question that we missed on this list rather purposely. Can you skip this altogether?
We know you’ve built your mini-empire after much hard work. And we know you’re pretty much upset about it all, no matter how brave you seem on the outside. We encourage you to ask this question yourself. Question whether you truly are a deadlock or alternates like these can be considered. Good luck!