How to Plan Your Small Business Exit Strategy

Whether you’re planning to merge, liquidate, or sell, it pays to have a sound business exit strategy for your small- to medium-sized company. As its owner, you’ve worked diligently to build its reputation. You’ve poured a lot of blood, sweat, and tears into making it a success. So, why wouldn’t you want to see it succeed far into the future?

Of course, selling a business is much different than operating a business. To get the most out of it, you’ll want to work with a professional business brokerage. And, naturally, you’ll want to come to the table with a plan of your own. But how should you go about putting your exit strategy together?

So, what is a business exit strategy?

If you’re this far, you probably already know the basics: a business exit strategy defines what happens when you’re no longer a part of your business. When you started your company, you probably had a business plan that described how it would operate, how it would position itself, and how it would grow.

As you create your strategy, it’s important to think about your future. Will its sale ensure that you have enough money to live comfortably? Do you plan to stick around during a transition period? Is everything ready to ensure you get the maximum amount of value from your business?

An exit strategy helps you give your business a satisfying conclusion.

Why is it important to have a business exit strategy?

It’s easy to get wrapped up in the present and forget about the future. But, in business, you have to keep your eyes facing forward. Whether you’re launching a new product, building a new client base, or expanding into a new market, planning is absolutely critical. Of course, all this planning can easily swamp you with work. Focusing on your future in the business can cause you to lose focus of the future of the business.

However, exit planning isn’t just about the future, it’s about shaping your business’ present.

Recent studies have shown that nearly half of all business owners have no exit strategy. In most cases, it takes years to successfully transition out of a business. Sure, you can liquidate much faster than that. But, for the sake of your customers, employees, and family, is that really the best option? For a number of reasons, it’s absolutely essential that you have a well-documented plan to guide the future of your business after your exit.

It guides your decisions. As we said, a business exit strategy is about shaping the future of your business. With one in place, you can begin transitioning employees into leadership positions, defining pre-exit goals, and build a vision for the company’s life.
Keeps the vultures at bay. When you have a clear vision for your business’ future, you can better understand its value. This understanding will help you avoid low, predatory offers for your business made by opportunistic buyers.
Get into the retirement mentality. In a lot of cases, building an exit strategy is the first step toward eventual retirement. Having a set date, a plan, and steps to follow helps you to get into the retirement mindset and, when the time comes, you’ll be ready to move forward.
Be ready for a favorable market. You never know when the market will favor selling. So, when it does, it pays – literally – to have a plan. When the market is high, having a strategy allows you to capitalize on it and, if desired, move forward with an early exit.

Exit planning for small- and medium-sized businesses

Before writing your business exit strategy, you need to answer one important question: How involved will you be in its future? If you’re looking to get out fast, you may need to adjust your expectations in regards to pricing. But, if you plan to stick around, you can take steps today to ensure that you get the most out of your business.

Strategies for a quick exit

Liquidate Everything: It shouldn’t be a surprise that this is one of the less attractive options for owners looking to sell their business at full value. Liquidation involves quickly selling off your company’s assets and paying off its debts. It’s not a particularly lucrative option but it has the benefit of being quick.
Increase Your Salary: As far as no-hassle plans go, increasing your salary can be a simple solution. In the years before your retirement, simply settle your business’ debts and increase your salary by cutting investments into the business’ future. Sadly, this option almost always ends in the closure of your business.

Long-term exit strategies

Merge With a Competitor: If you have a competitor that’s looking to grow, planning a merger is a great business exit strategy. Your company’s employees don’t lose their jobs, your competition grows, and you’ll generally get compensated fairly. If you’re not looking to retire fully, you can also negotiate a part-time role on the company’s board.
Sell Your Business: Selling to a third party is the optimal way to extract the most value from your business. By finding the right buyer, you can negotiate a higher price, equity in the company, or an advisory role on its board. It is important, however, to work with a business broker to ensure that the buyer is financially capable and aligned with your company’s values.

Need help developing your small business exit strategy?

You’ve worked hard to build your business. When you retire, you deserve to be paid its full value. By partnering with Advanced Business Brokers, you can be confident that you have an experienced team working on your behalf to locate qualified buyers. So, if you’re thinking about exiting your business in the near future, reach out to us today for help with business exit planning.

Work With An Experienced Business Broker

If you’re thinking about selling your business and don’t know where to start, consider speaking with our team here at Advanced Business Brokers. We specialize in brokering and advising exit plan strategies for various sizes/sectors of businesses.

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