(This is a contributed post)
It’s always a good idea to be prepared for the future. A business exit strategy is essentially a plan for if and when you want to leave your business. There are several different ways in which you can decide to do this. There could also be varying factors that affect your decision to leave. Having a business exit strategy in place is recommended by financial and business advisors in order to protect your business and minimise any future losses. Here are five examples of exit strategies.
Initial public offering (IPO)
Probably the most lucrative business exit strategy, initial public offering (IPO) is when business owners sell their business to the public for a profit. The success of an IPO depends on the conditions of your business at the time. It also depends on the type of industry you work for and whether or not this appeals to stock buyers. If you can pull off an IPO, which is rare, you will likely make the most profit from selling your shares publicly.
Another more common often is to merge your business with another company. Ideally, you should merge with a business that has similar values to yours. Merging two companies can be complicated and often one business becomes the junior partner to make it simpler. It’s essential, however, to have a fully aligned vision and goals, and be sure of your reasons for wanting to merge. For further information, here is a guide to small business mergers.
In order to protect your small business, you could sell it to another company instead. This will give you the option to either stay or leave the company depending on the agreement. A takeover is usually more common than a merger because it makes more financial sense. There are several other reasons behind acquisitions. These include economies of scale, diversification, greater market share, cost, niche offerings, and improved synergy.
As opposed to selling your business to another company, you could consider selling to a manager or an interested employee. This type of exit strategy is known as employee buyout and it often ends up being a smoother and more successful transaction. This is due to the fact that the employee already has an idea of how the business works and will normally display more loyalty to the company. If you want to move on from your business to something else, you could leave your legacy with one of your trusty employees.
Sell your shares
Another way to exit your business is by selling your shares. This is only if you’re not the sole proprietor and you only own a stake in the company. You can trade stocks and shares with other investors and make a profit. In this situation, the business will likely continue to run as normal but you will exit safely with your investments. If you’re a business investor, you can then invest in another company or your own. You can also sell shares in your own business.