Whatever the motivation or circumstance behind an exit, it is important to have a strategy in place. Even if you have no immediate plans to exit, preparing for the future is good for business.
Choosing the best strategy means knowing the array of the available exit options and evaluating them against business priorities.
Here are 7 ways for an Entrepreneur to cash out.
Keep it in the Family: Many entrepreneurs want to keep their business in the family long term, and that means making plans for transitioning the company to an offspring or another relative at a certain point in time. This option does give you the ability to groom successors over time—just make sure your family relationships can handle the volatility and stress of business ownership and they are actually equipped to running the business.
Sell to a partner or Investor: If you aren’t the sole proprietor, it’s possible to sell off just your stake to a business partner or other investor. This can be a relatively “business-as-usual” exit strategy, depending on the buyer.
Mergers and Acquisitions: If your business is aligned with the goals of another company, then there is the possibility of being acquired. Acquisition is one of the most common exit strategies: You find another business that wants to buy yours and sell, sell, sell. The chances of getting the price you want is higher, (well…depending on your negotiation skills and your perceived value!) If you choose the right acquirer, your value can far exceed what would be reasonable, based on your income. Our tip – build a business that will get aquired.
Let’s float it, The IPO: An IPO (Initial Public Offering) is where you put your business on the stock exchange and sell it to the public. It’s not an easy task…Business conditions need to be just right for an IPO to be successful (not to mention the dollars involved in completing an IPO). Although it has the potential to be very lucrative and bring you lots of press, it’s not for the faint hearted. An IPO (if successful) will leave you scrutinised by analysts with demanding shareholders – hardly a stress free way to exit!
Acquihire: An acqui-hire is when one company buys out the other one specifically to take the employees. It’s a popular strategy with tech startups. A good acqui-hire can bring in a lot of new talent at the same time. Plus, the employees have experience working together as a group.
Management/employee buyout: It’s possible that people who already work for you, who know how to manage the business, may want to own it as well. This could result in a smoother transition and increase loyalty to your business’s legacy. And because they probably know you so well, they may allow for flexibility in terms of your involvement—perhaps they’ll want to keep you on as a mentor or advisor.
Liquidate: For small businesses, liquidation is a common exit strategy. It’s one of the fastest ways to close a business and may sometimes be the only option in cases where the operation of the business is dependent solely upon one individual, where family members are not interested in or capable of taking over, and where bankruptcy is close at hand.
It’s worth noting though that any profits made from selling assets first need to be used to pay creditors.To make any money using liquidation as an exit strategy, you’re going to have to have valuable assets you can sell—like land, equipment, and so on. It’s important to remember that it doesn’t mean you ever failed as a Business owner. It’s simply the logical next step.
Bleed it dry! Well…We don’t actually mean run it into the red, rather, just pay yourself a huge salary and bonuses bigger that what is actually reflective of company performance. Essentially you are not re-investing back into the business to grow it, but living off the income generated by the business to fund your lifestyle. This method suits if you have steady cash flow and you’re in it to just have nice things. Don’t do it if you are after an investor or looking for future business growth. You may regret pulling money out now that you might need later.