7 Exit Strategies for Small Business Owners

Looking for exit strategies for small business owners? These 7 strategies will be very helpful for you.

Every natural or legal person who has invested in a small business seeks to know exit strategies. Even if you run a small business, you will still need a small business exit strategy. As an entrepreneur in the business world, you will have similar questions to other investors:

1. How are you going to make money from this business?

2. And how much will you earn?

Having an effective small business exit strategy will ensure that you provide satisfactory answers to these questions and take control of the future of your small business.

exit strategies for small business owners

Here are 7 Exit Strategies for Small Business Owners

1. Liquidity

The first strategy refers to selling the store and selling all the assets. For small businesses, especially those that depend on a person’s performance, liquidity is the only solution, because there is nothing to sell. If you are in such a situation, you may want to redefine your business so that someone else can run it.

Advantages:

– Simplicity

– Your business can end quickly (depending on when you sell assets)

Related Article:  12 Steps to Starting a Profitable Business

Disadvantages:

– Liquidity will have the least return on investment for the owner (owners). The only money that can be earned from liquidity is the transfer of assets, such as land, equipment, or items. The goodwill value of a customer list or any other type of business relationship (which may be necessary for a business) is lost.

– The value of second-hand assets for items such as machinery and equipment will be very low, even in non-stagnant markets.

Creditors (if there is a loan) are the first to claim the proceeds from the sale of assets.

2. Liquidity over time

In this small business exit strategy, the business owner has made a profit over time while doing business (even before he or she closes or sells the business), and tends to reinvest the proceeds. He did not have a business to develop the company. This is usually done by receiving high salaries or high dividends over a period of several years, which occurs before the business closes. This strategy is suitable for those owners who want to improve their current lifestyle, not to develop their business.

Advantages:

– Lifestyle – Deleting and writing cash on a current basis for personal purposes (instead of waiting for the final profit from the sale of the company).

Disadvantages:

– Removing the profits from the business from the company’s turnover reduces the company’s growth capability and reduces the final sales value.

– Other shareholders (if there is a shareholder) may object to this, unless their losses are compensated.

– Salaries received in this way are taxed because they are considered personal income, while when profits remain in the company, they increase the value of the business and are taxed at the time of sale of the business as capital supplements.

Related Article: 20 Most Profitable Business Ideas Related to Advertising and Marketing 

3. Make your business family

The dream of many small business owners is to make their business family-friendly so that you can ensure that your heritage remains intact and secures the future of your survivors.

Advantages:

– Facilitates the transfer process for survivors.

– It may allow you to strengthen your consulting capacity or another business capacity.

Disadvantages:

– Creating a family replacement plan can be very difficult and can lead to conflicts over ownership or business partnership between family members.

– Family members may not have enough skills to run a business.

– Clients may not accept new management or changes in the company.

4. Sell ​​your business to your managers and/or employees

Your current employees and / or managers may be eager to buy your business.

Advantages:

– This business may progress because employees get a business that has already been created, they are familiar with it and they are interested in it.

– Creating a long-term sales plan for employees can increase their loyalty and increase their motivation to work better and succeed in business.

– It may be possible to take over a portion of the company’s stock and your presence on the advisory board (or any other portion).

Disadvantages:

– Employees may not be eligible for business management.

– Clients may not accept new management or changes in the company.

One way to use this exit strategy is to use the Employee Share Ownership ( ESOP ) plan . An equity scheme for employees who are allowed to take ownership of the company.

However, the purchase of a company by an employee does not include this plan. It simply means that one of your employees becomes the owner of your business through direct company acquisition.

5. Free market business sales

This is the most popular option for small businesses. A business owner at a certain point in time, often when a person is about to retire, leaves his business for a certain amount to sell, and optimistically leaves the scene with the desired amount.

Advantages:

– A profitable business is attractive to buyers and sells quickly.

– Assets and goodwill can be calculated at the time of business valuation for sale, to increase the owner’s return.

Disadvantages:

– It can be very difficult to sell a business with a profit margin. According to the bizbuysell website (which is dedicated to buying and selling small businesses), only 20% of businesses registered on this site are actually sold. Finding a buyer in the open market may take time.

– Business valuation may be difficult and sales may be much lower than expected.

If this is your preferred exit strategy, you need to take the time to prepare your business for sale. Pull it over your head and ears and make it attractive to your potential buyer.

6. Sell ​​your business to another business

Valuing your business can be very rewarding. Businesses buy businesses for a variety of reasons, such as: using a new property to develop a fast path, understanding the importance of joint ventures, or just buying a competitor’s business (and getting rid of it). Get rid of it).

Advantages:

– For the above reasons, a competing business may be willing to buy your business, and bring you quick sales and maximum profits.

Disadvantages:

– If your only motivation for buying a business is to reduce its competitors, they may close it after buying your company and your employees will become unemployed.

– One of your competitors may be willing to buy your business to access your subscriber list and financial information.

The trick to success in this exit strategy is to pre-determine the ultimate educator of your business and prepare your company according to his or her tastes. And then, convince him that your business is worth buying.

7. Initial IPO

Although not suitable for all businesses, it can be a good exit strategy.

Advantages:

– Offering your company’s stock can be very beneficial.

Disadvantages:

– Becoming a public limited company is a long and expensive process.

Depending on how the initial stock structure is structured, when new shareholders want to use all the money from the IPO to expand the business, you may or may not be able to withdraw part of your capital as a previous business owner.

– Public joint stock companies have higher standards of compliance and reporting. As a business owner, you may be personally prosecuted for “illegalities” or breaches of your disclosure.

The best exit strategy

The best way to get out of a small business is to find one that works for you. First, determine exactly what you are running away from. If it’s just a matter of money, an exit strategy like selling in the open market or selling to another business can be a good option. If your heritage and observation of the progress of the business you have made is important to you, then it is better to leave it to your family or sell it to your employee.

You need to make time for each of these small business exit strategies. Previous planning helps you do the right thing and increase your productivity.

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