Most business owners generally don’t plan on working on one project for the rest of their lives. Those who are drawn to entrepreneurship typically like the challenges that come with starting and growing a business, and they frequently use the advantages of a successful exit to fund new enterprises. Some founders even create their businesses with the stated intent of exiting after a predetermined length of time has passed or after reaching particular milestones.
Have a plan in place before you consider selling your business to a bigger organization, handing it over to family members, or going public. A formalized exit strategy can help you make decisions in unforeseen situations, provide you with a realistic idea of the value of your company, and highlight potential ways to increase that value. Making a plan doesn’t have to come before taking any immediate action, but doing so increases your chances of doing so when the time comes.
An exit strategy offers a roadmap for your departure from your business, just as a business plan acts as a road map for starting and expanding it. You must take into account your own financial objectives, your obligations to investors or creditors, and how much you want to stay involved in your business when deciding on the best exit strategy. You should also take into consideration the legacy you want to leave as a founder and the desires of the people who have supported you along the way. As you establish or revisit your exit strategy, ask yourself the following questions to ensure you’re set up for success:
What’s My Company’s Best and Worst?
The worth of your company, which is mostly an indicator of its potential, determines the potential upside of your financial return as an outgoing founder. An appealing target for buyers is a company with consistently rising sales and profit margins, a strong leadership team, a sizable and devoted customer base, and a unique offering in a sizable market. A business that lacks these and other crucial characteristics could be viewed as a ship in trouble.
When determining if your company is on course for a successful exit, a straightforward examination of your business’s strengths, weaknesses, opportunities, and dangers is a fantastic place to start. “It is hard to effectively map out a small business’s future without first examining it from all perspectives, which involves an extensive look at all internal and external resources and risks,” explains Bonnie Taylor, chief marketing officer of CCS Innovations.
Make the time to speak with a variety of stakeholders, such as employees, partners, and customers, even though you may already know practically everything there is to know about your company, in order to acquire extra insight. Ask them to be as unbiased as they can when giving you feedback so you can create a precise and thorough understanding of your strengths and faults.
How do I tell My Business Story?
A captivating origin narrative can work as a guide for making strategic decisions, a lighthouse for luring clients, investors, and talent, and an intangible asset that can significantly raise the worth of your business. Your tale can operate as a magnet when the time to go draws near, attracting those who want to keep it going and repelling others whose interests don’t coincide with yours.
According to Corey Blake, CEO and founder of Round Table Companies and a specialist in corporate storytelling, effective storytelling may aid business owners in preserving their legacies and increasing the likelihood of a successful transition. It’s more probable that purchasers will be considering what they do with the company once the previous owner relinquishes control if owners foster an environment where potential buyers can fall in love with the business, he says. And by delivering a compelling tale, owners entice prospective purchasers to take the lead in the story’s continuation—the company’s next chapter.
What’s the Best Exit Strategy?
There will be a huge increase in competition if you are an existing business owner seeking to complete a sale soon. According to data from the Exit Planning Institute, Baby Boomers control around 66% of the US corporate sector, and the majority of them will be leaving their enterprises within the next ten years. As a result, companies looking for acquisition targets will have a larger pool from which to choose, which may make it more difficult to maximize your return.
Selling your company’s assets to liquidate it could be a very simple exit strategy if you’re the lone proprietor and no family members are interested in taking it over. Although the money from selling the land and equipment could be significant, you should think about how it will affect the stakeholders, including your staff, clients, and consumers.
Negotiating a buyout could potentially be a very easy (and profitable) option that protects your founder heritage if you have staff, business partners, or investors who would be interested in acquiring your ownership. In general, it will be simpler to guarantee that everyone is on the same page when it comes time to negotiate the earlier you start talking about transitions.
In the end, you should be the one to choose when and how to leave your business. No matter how far the change may appear, by providing answers to the aforementioned questions, you can create an exit strategy that increases your chances of a successful one.
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