Preparing a Business Exit Strategy

When you first start a new business, you likely won't be thinking about a business exit strategy. However, as time goes on, it is important to ask yourself what your plan is for the company. You will not be able to work forever. At the end of your tenure as owner and operator, what do you foresee for the future? Would you like to turn the business over to a family member? Would you like to sell the business for a profit? What if the business starts to fail; when will you call it quits? It is important to have an exit strategy before you face such hard decisions.

Unfavorable Exit

The reality of the business world is that even very successful businesses may fail in the future. The industry changes, and things can come up. You may even make poor business decisions, and this can be the cause of financial difficulty. It is very easy to get into a position where you continue to put your personal assets and work into a company that is no longer profitable. You have to draw the line somewhere, though. How much are you willing to put into your business in order to keep it running? If you must close the business, are its assets sufficient to cover its debts? If the business goes bankrupt, are your personal assets covered? Consider these issues as soon as you note your profits falling.

Sale of Assets

One way to exit a business successfully is to sell off its assets. This plan is best for a company that owns a large amount of actual, realized and valued assets. For example, if you own a business building rental properties, you will have a large asset base in the future. You can decide to simply sell off the assets one by one in order to make a profit and walk away from your company when you retire.

Sale of Business 

Some businesses are most valuable as a whole rather than in part. For example, if you own and operate a property management company, your business is valuable because you have a book of clients, a business model and other assets for sale. At the time you plan to retire, you may consider selling the entire business to a new owner. The new owner can take over the assets you have sold him or her and use them as he or she pleases. This may mean the business continues to operate the way you ran it. It may also mean changes in operations or even the sale of assets in the future.

Relinquishing Responsibilities

You may want your company to continue to run the way you have run it during your time as owner and operator. This may be a family business or a source of pride in your life. In this case, it is best to remain in place as owner of the business and simply relinquish the responsibility of managing it day-to-day. You can replace yourself with a family member or capable employee, but you will remain a part of the business throughout your lifetime. You will not realize a large profit from the sale of your assets, but you will continue to collect a salary as owner of the company.