Business Owners, What is Your Exit Strategy?
Oftentimes our clients are surprised to hear that we strongly advise them to start planning their exit strategy as early as possible. In fact, planning it out when you first start the business is a good idea. This may at first seem counterintuitive. However, there is tremendous value to having a plan in place. Our New Jersey, New York, Maine, Pennsylvania, Rhode Island, Connecticut and Vermont business brokers can assist you with strategy.
What is an Exit Strategy?
An exit strategy deals with what you do when you leave your business. Typically, it is a plan to either sell your company or shares to an investor or buyer. Common exit strategies include being acquired by another business, a management or employee buyout, selling your stake to an investor, or even taking your business public with an IPO.
Keep in mind that of all the strategies mentioned, IPOs are the rarest though often the most lucrative. The conditions have to be very exacting for this to be a possibility.
To get the data that you’ll need to start planning, we recommend you get an accurate idea of what your business is worth through a business valuation in New Jersey, Connecticut, New York, Maine, Vermont, or Pennsylvania.
The Decision-making Process
Once you have your exit strategy confirmed, you’ll be able to make key decisions. For example, would you want the business to be run in a similar way after you leave? Do you want to maintain involvement in the business? Or are you ok with things changing dramatically once you’ve been fully compensated? For example, if your plan is to obtain a strategic acquisition, you’ll be giving up control.
The type of business also plays a part. For example, if your company has various founders, you’ll have to consider other people’s decisions as well. If you have a partner or family member you are thinking of selling to, it can change how you might handle things in the short term.
The Time to Plan is Now
If you wait until the last minute to plan your strategy, your decision-making may be clouded by the stressors of the situation. For example, if you have to sell due to an unexpected medical issue or dissolution of a partnership, you may feel under pressure to quickly decide. Market conditions will also be a factor at any given time. For example, if the interest rates are high, a buyout may not be as easy.
Not only do you need to have a business plan to run your business, you’ll also want a strategy in place for the conclusion. If your business is financially successful, your exit plan will allow you to move on while you’re still bringing in a profit. On the other hand, if your business is not as successful, your exit strategy can cut your losses. Having a plan in place far in advance will help ensure not only an easier transition, but also a more profitable one.
Take time now to think about your personal goals and business goals. If you haven’t had a business valuation, it is recommended part of forming your exit strategy. Inbar Business Group can get you an accurate and professional business valuation in New Jersey, Connecticut, New York, Maine, Rhode Island, Vermont, or Pennsylvania. You will also want to talk to professionals including accountants, attorneys and Vermont business brokers or our brokers in New Jersey, Connecticut, New York, Maine, or Pennsylvania. Regardless of what you choose, planning ahead is the best path to success.