An exit strategy is simply your plan on how you are going to get your money back out of the business. This may be a sale to another investor or company. It may be the liquidation of the business or a reduction in your stake in the company. Likewise, if you are looking for investors to grow your business, they will want to know that you have an exit strategy in place.
Planning an exit strategy is often one of the most overlooked considerations when you’re putting your business plan in place, but the brand strategy Omaha should play a leading role in all your strategic decisions. Planning upfront helps you and your heirs avoid limited options when you decide it is time to move on.
Benefits of an exit strategy
Not only will you have peace of mind, but an exit strategy will:
- Change how you guide your company’s future
- Understand and protect the value of your company
- Help you mentally prepare for an exit
- Create a smooth transition for all stakeholders
- Offer control of your life and generate income for your retirement
- Enhance the future worth of your business
- Defer or reduce the potential tax impact on you and your heirs
Types of exit strategies
There are several types of exit strategies you should consider when putting your plan in place.
Many business owners plan for their exit by paying themselves now. You can take a huge salary, give yourself a big bonus each year, or create a special class of stock that pays you a high dividend. While you wouldn’t do this if your company were public, this is possible for a private company.
This is called a lifestyle company. It is set up and run by its founders primarily, with the aim of sustaining a particular level of income or to provide a foundation from which to enjoy a particular lifestyle.
Liquidation is another option you can use when you’re ready to call it quits. You just close the doors and cease business. You then sell the assets, pay the creditors and the remaining money is yours. This strategy may be your only option if the business is dependent on your performance and there is nothing else to sell.
If you think this is your only option, you may want to consider ideas to revise or retool your business so another person may be interested in buying it.
A friendly sale is when you sell your business to someone who is as emotionally attached to your business as you are. They will want to preserve your legacy. This can include family members, employees or even customers. Many business owners do not think of customers as potential buyers, but our customers often love our business just as much as we do.
If you decide to sell your business to your employees, you may need to consider seller financing. This is when you finance the sale to employees, and they will pay you back over a specified time period.
Acquisition is an option when you sell your business on the open market or to another business. This is one of the most common forms of an exit strategy. Public markets will value your business relative to your market and once you find an interested buyer, you will negotiate the final selling price.
I think we all dream about making it big and having an IPO (Initial Public Offering), but this is the least likely scenario for your exit strategy. Most U.S. businesses are privately held and the true number of public companies is somewhat ambiguous depending on which source you look at.
You will be more likely to have an IPO if you are funded by professional investors with a track record of taking businesses public. IPOs are also costly and time consuming, so while you should consider this option if you have the right type of business, you should be looking at all your other options as well.
There are many pros and cons to consider when developing your exit strategy. If you would like help to develop or refine your brand strategy Omaha, we’re here to help. Outlook Business Solutions offers an array of marketing and sales services from strategic planning to copywriting and public relations. We’re here to help you grow your business, inspire your customers and exit your business if you ever need to do so.