Every business owner needs to understand their exit strategy and which exit strategy suits their business. However, choosing the best exit strategy isn't simple. Exit strategies are nearly always tough decisions. You must understand the advantages and downsides of each exit strategy, and we will help you with this.
What does an exit plan mean?
An exit plan means ending your involvement in your business. For most people, that means preparing your business for a change of ownership. The number of exit routes may seem endless, but typically, you'll choose from these eight strategies:
It's wise to obtain the advice of a professional financial advisor with experience in exit planning for business owners before deciding which business exit plan works for you.
Why is exit planning important?
Business exit planning is vital for the following reasons:
When should you exit a position?
For most business owners, choosing when to exit a business is an incredibly tough decision. You may have spent decades growing the business into your dream company. As a result, starting a business exit plan is emotionally stressful and overwhelming.
However, there are some telling signs you're ready to start your business exit plan. Here are some of those signs:
You're ready for retirement, or you need liquidity from your business
The most apparent signs you're ready to exit the business are that you've reached retirement age and you need more liquidity to live comfortably.
Economic freedom is no longer there
Most business owners aim to achieve financial independence when they leap into the entrepreneurial world. Nonetheless, starting your own business venture isn't always financially fruitful. You may find you need outside investment along the way or a business partner who adds critical knowledge and resources.
The startup challenge has diminished
Many business owners relish the prospect of starting a new business. Yet once they've established a business and grown it into a financial success, they find the routine and predictability dull. Subsequently, they feel driven to build more businesses. If you feel you've accomplished your goal and are ready for the next challenge, you should consider starting your exit strategy.
Your business is thriving
If you're a business owner, you want your business to grow and thrive. However, it's never too early to start planning for your exit. Setting up an exit strategy allows you to leave the company in good hands while taking some or all of your stake in the company. No matter the timing, you'll want to make sure you have a plan in place for when you do decide to leave the company in the hands of your successors. We recommend starting early to maximize your hard-earned ROI.
Sometimes, owners of successful businesses — in all industries — will cash out because of uncertainty surrounding future market developments. Government regulation and business regulation may severely affect your business model. In other cases, competition may enter your market and threaten your business model.
Your business is IPO-ready
If you've been able to rapidly grow your business, you may want to consider an IPO to further scale your growth. Typically, you'll need a stellar customer base, profitable financials, growing revenues, and a considerable market share to consider an IPO. A successful IPO can provide a superb exit strategy if properly executed.
How do you make an exit plan?
When you decide on your business exit plan, you'll need to follow these steps:
If you're considering business exit planning, you should speak with a professional financial advisor with expertise in business exit planning. They will understand your concerns and queries and make the process effortless for you.
Planning to leave your business is much easier if you have a business exit plan. At Moffatt Financial Services, we have exit planning advisors who'll help you every step of the way.
Get in touch with us if you're considering exiting your business.