Best Business Exit Strategies in 2024
The Denver business boom is showing no signs of slowing down in 2024. Businesses are growing rapidly, defying the challenging economic conditions. This is great news if you are a successful business owner in this great city.
However, if you are saying goodbye to your business for whatever reason, the business boom will not interest you at this point. You need a great business exit planning strategy to leave on your terms while maximizing business value.
Planning your exit is much more than getting the most money from the deal. It should be about protecting the legacy you worked hard for and ensuring a smooth transition or handover (if you are not selling or liquidating the business).
What Is a Business Exit Strategy?
A business exit strategy is a plan owners create to sell their ownership to another person or company. Using such a strategy allows you to end your stake in a business and make a profit (if the business is successful).
If your business is no longer successful and you want to exit, your strategy can help you minimize your losses.
If you are an entrepreneur, you likely have an exit plan, which would have been included in your initial business plan before launching your business.
Most Common Types of Business Exit Strategies
There are several types of business exit strategies you could consider, depending on your specific situation. The most common exit strategies include the following:
IPO
If you choose an IPO (initial public offering), you present your business to the public. By doing so, you can sell your shares as stock. While this is a common exit strategy for many business owners, this option may be challenging.
IPO strategies could mean a lot of money, but only if the wider industry sees the potential in your business. Moreover, if you decide to take this route, you must consider regulatory costs and shareholder scrutiny. There is also due diligence to consider, which can be very expensive and labor-intensive.
Merger or Acquisition
If your business is unique or has a highly skilled workforce, businesses looking to break into your industry may want to buy you out. This means buying your business and all its resources. If you sell your company or negotiate a merger with another business, you can still profit while safeguarding your employees.
Liquidation
If you want to retire, you could also consider liquidating your business. In some instances, this may be your best option. By liquidating your business assets and dissolving the business, you can pursue other interests or retire.
Finding a Buyer
Finding a buyer is similar to a merger or acquisition. You can negotiate a sale with an individual who wants to buy your business. Selling your company to said individual will also allow you to regain some of your business investment.
Selling to Management
If you expanded your business over the years and now have a substantial management team, you have another exit strategy to consider. Your managers may want to see the business continue and could arrange for a management buyout. This will allow the managers to keep their jobs or apply for executive positions.
If you do not want to close your business completely, a management buyout is a good way to exit independently. This exit strategy will not disrupt operations too much, which benefits you and the management team.
Developing an Exit Plan for Your Business
You should plan your exit strategy long before you leave the business. This plan should focus on one of two choices: selling or closing the business. Whatever your choice, actually leaving your business will be overwhelming. So, you must follow the right steps to ensure everything goes off without a hitch.
The first thing to do is prepare an account of your personal and business finances. You need to know your expenses, the value of your assets, and how well your business is performing. This will allow you to negotiate a good deal if you want to sell.
Decide what you want to do after your exit and if you still want to be involved in the business in some capacity. At this point, you should speak to a financial professional to help you make the best decisions.
Let your managers and investors know you plan to exit the business and choose new leadership to take over your role.
Finally, inform your employees and customers about the business's future. If you are closing the company, offer your customers alternative options.
Enjoy a Successful Exit From Your Business
When you plan your exit well, you can leave knowing you have done your best for your company, employees, and customers. You can then confidently take on your next chapter.
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