Business exit strategies are a fundamental part of being an entrepreneur. Whether you’ve just opened your business or are actively seeking a way out – it’s crucial to know how you’re going to exit.
The goal with a business exit strategy is to leave the company in a better financial position than when you started. Sometimes that’s not possible, and the strategy is more about mitigating losses than maximizing returns.
Either way, there are several tried-and-true tips for creating a solid business exit strategy. We’ll talk about those tips, but first, let’s talk about some of the best options for exiting your business.
Business Exiting Options
There’s no shortage of creative ways to leave your business. Some of the most popular ideas include:
- Explore a Merger
- Find a Buyer
- Plan an IPO
- Liquidate the Business
- Pass the Business to a Member of the Family
Related Article: 13 Ways to Exit Your Business (by ExitAdviser)
These are just a few of the standard exit options. However, there are many others out there. Before you plan your strategy, get clear about what you want and what’s important to you.
Each route has advantages and disadvantages, so you want to speak with your investors, employees, family, accountants, and lawyers before committing to one single exit strategy.
Now, let’s go through some of the best tips for creating a winning business exit strategy.
Tip #1: Get and Stay Clear on The Financials
Financials are fundamental to any business exit strategy. You need to get clear on your revenue, net income, taxes, expenses, cost of goods, marketing costs, and more. If you haven’t invested the time or energy into solidifying your accounting, now’s the time to do it.
No matter what exit strategy you choose, having clean financials that are easy to navigate will make the whole process much smoother. Don’t skimp out here. You can’t be over prepared when it comes to the business’s accounting.
Tip #2: Know Your Business’s Value
Once your financials are in order, you’ll want to get a handle on your business’s value. Use a business valuation calculator to ensure that you have a clear idea of how much your business is worth.
Beyond that, regularly take time to update the value based on market conditions and trends. Use the tools at your disposal to forecast future profits, so you can always keep an idea of the true worth of your business.
Knowing how much your business is worth ensures that you don’t get duped by buyers who want to undercut you.
Tip #3: Keep Everyone Informed
Throughout your exit, it’s essential to keep everyone informed. Make sure your investors and employees aren’t ever out of the loop. While you can and should withhold information from your employees until things are certain, you don’t want to cause undue stress by withholding information.
Investors, upper management, board members, and high-level executives should be aware of what’s going on. They can derail your plans if you keep them out of the loop.
Tip #4: Lean on Professionals
There’s plenty of free information out there. However, when it comes to exiting your business, you want to rely on the professionals. If something is outside your purview, reach out for help.
Surround yourself with professionals who can ensure that you’re doing everything correctly. There’s a lot of legal red tape and potential pitfalls, so it’s best to lean on the wisdom of others when you need to.
Tip #5: Don’t Commit to Any Offer Prematurely
When you first start, don’t commit to anything prematurely. You want to sus out several offers before jumping on the first one that sounds good. Often, there’s a lot you need to investigate before committing.
Too often, entrepreneurs commit to deals in the first meeting rather than taking the appropriate amount of time to make sure a deal is solid. On this same note, don’t be afraid to walk away from a deal. If something doesn’t feel right, for any reason, walk away.
Tip #6: Start Prepping Today
Business exits can take years. You must start prepping now. Even if you have no immediate plans of exiting, you want to make sure that you’re primed for a profitable exit.
Start working on making your business more valuable to potential buyers today. Amp up your team. Find ways to increase profitability. Clean up the backend. Try to view your business as a prospective buyer, and make sure to take the steps today that will lead to a pain-free exit in the future.