Every business owner knows that it’s wise to manage your business with the long term in mind—which includes planning the appropriate exit strategies before retirement. You have to plan not only for the transition of management, but also for the most beneficial way of getting your money out.
If you want to make the future of your investments easier to safeguard, you can start considering the following strategies for your business as soon as possible.
Liquidating your business means closing it entirely and selling all the assets at market value. The only way to maximise your benefits from this option is by having valuable business assets to sell. You can expect to make a bit more at the end of your business if you hold and maintain land properties or expensive equipment used for operations. Before keeping your share of the profit, remember to pay back your creditors so you can avoid stockpiling debt.
If you have a family member who is trustworthy and capable enough of handling the business, you can choose to groom him or her as a successor. Having someone from the family take charge can have its drawbacks because of preference and qualification issues, but it can be a way to further the legacy you’ve built. In some cases, family members will even allow you to retain some say in the business.
The best way to proceed with making a family business succession plan is to pay attention to the personal ambitions of everyone concerned. Management and business ownership are not always the same, so be aware that the right to getting an equal amount of shares in the company can be offset by your relatives’ involvement or inactivity in operations.
Selling your business
You can also opt to sell your business to current employees, other businesses or the open market. The trick is in locating your target buyer early on so you can identify how to position the sale. Depending on the goals of the entity who purchases your business, it could continue to be operated or be shut down entirely.
There are many instances where managers become interested in buying your business themselves. The advantage of selling it to people inside your business is that they are already familiar with its operations inside and out. If this is an option you’re considering, the actual process of selecting and preparing a successor should be included in your exit strategy.
It can also make more sense for you to sell on the open market or to another business. The only preparation you’ll need is to condition your business to be a profitable acquisition. Putting a decent price on the business usually requires being able to sell it with improved business processes and well-maintained assets.
Initial Public Offering (IPO)
Taking your company public can be a lucrative exit strategy if you own a large-scale business. This involves selling shares of the company on the public market. Depending on whether the newer shareholders want to invest all of the business’s money in expanding, you may or may not be able to withdraw your capital as soon as you want. If you would like to pursue IPO, it would be important to know about the residual value of your business at the time of offering as well as additional requirements for operating as a public company.
Choosing an exit strategy in advance gives you a clearer view of your business’s future and lets you align resources to fit your desired outcome. Whichever exit strategy you choose, make sure it is one that will protect you from losses and enable you to maximise your returns.
Take our TRUST Assessment to evaluate what your business needs for earlier exit planning and business process improvement.