Your Business Is Your Biggest Asset. Which Exit Strategy Will You Use?
Exit Strategy One
You will die while still working your business.
Let’s address each and every one of these exit strategies. It is a fact that one out of one will eventually die. No one knows exactly when this will happen and unless you are struck with an illness that becomes terminal, it will always a shock and it is never at a good time. This exit strategy is the one that unfortunately most business owners plan the least for and because of this lack of planning, it is also the most financially devastating.
Exit Strategy Two
You will pass the business down to family members or co-workers.
You decide to pass the business down to your kids or someone else. Many times, a business owner will have their children work in the business from the time they are quite young. It is the dream of most business owners to eventually have their children take over the business and pay them a monthly retirement check. Statistically, more than 70% of business owners who had succession plans in place failed. Fewer than 15% of businesses that passed to children survive the second generation and even less made it to the third generation. (According to a 2008 global study conducted by U.S. Trust, Bank of America Private Wealth Management, Prince & Associates and Campden Research).
Have you prepared your company to be taken over by a family member? Have you set in place a game plan to keep the business running so that it can keep paying the bills for your spouse and family? If you have then you are one of the very few. If you have, you have also helped prepare your company for an eventual sale as well!
One of the most often questions asked of business owners in considering a sale is, “If we take you out of the business, what is left?” This is a very important question because many business owners position themselves within their business so that they are the business. The value of the business lies within his or her being there while the doors are open so if you take them out of the picture, the business fails.
It is vitally important to start taking steps to reshape your company so that you the business owner is an overseer, not the chef, the waitress, the dishwasher and the janitor. (Insert your company responsibilities) This way if something does happen and you are taken out of the picture, the company will continue to provide an income for your family. If you make the decision to sell, you will have already set up your company so that buyers will want it.
Exit Strategy Three
You will one day close down the business and hang up the keys
You are tired so you close the doors and hang up the key. This is the worst possible exit strategy because your business, even more than your home is, or at least was your greatest asset. By proper advanced planning, you can capitalize on that asset to help give you additional money from the sale of the business instead of the liability of closing the doors.
Exit Strategy Four
Sell Your Company
You make the decision to sell the company. This most often is the best choice by far. Selling your company will give you additional money for your retirement. It takes the pressure off of you to rely on your children to run your business successfully as you did. This choice really is the best way to capitalize on your greatest asset.
There are two main reasons for selling your company. One, you want to retire and two, you want to start a new venture. Retirement is pretty obvious, you don’t want to continue working and you desire to enjoy your golden years. The second reason, you want to start a new venture. This is the case more than most people realize. Just as I did when I started my last company, the day I incorporated it, I made the decision to sell. I had some goals in mind and I gave myself ten years to accomplish this goal. I did it in eight years. A lot of entrepreneurs like starting over with a new project from time to time; it keeps things interesting and fresh. In either case, it is important to prepare your company to maximize its value.
Which choice will you make? Even when you feel you are too young or not ready to start thinking about an exit strategy, you need to start molding your company to that ultimate end. This usually doesn’t happen overnight, and when you have more time it makes the process less stressful. You will find that if you start taking steps to shape your company for an eventual sale, you will end up creating a company that allows you more time and freedom. You will also find that in most cases, you will become more successful in the process.