Planning Your Small Business Exit Strategy?

Shutting down the operations of your business can be an overwhelming and painful moment. A business exit strategy is probably going to be the last thing on your mind. Some entrepreneurs argue for having an exit strategy for the business plan at the initial stages, whereas others believe in developing it later. Choosing a strategy may not be easy, but it will provide you with insight into the company's future or framework. This blog will walk you through business exit strategies and how you can plan one.

Why Plan Exit Strategy for Business Plan?

Before we talk about how to plan, let us learn the key benefits of setting up a business exit strategy.   

• It provides a sense of direction to entrepreneurs.
• It allows organizations to be more proactive than reactive.
• Having a business exit strategy will provide insight into the company's worth.
• You will understand the market conditions, the company's assets, and other records.
• It will even allow for a smooth transition for other teams and stakeholders.
• An exit strategy may even make it easier to foresight and capitalize on the new opportunities available in the market.
• A strategy will prepare you for the emotional and mental issues you may face later.
• It will prepare you for crisis situations and help you deal with them effectively.

Evaluating Selling vs. Closing

The first thing that you need to determine before creating a business exit strategy is whether you want to continue with the operations or wish to shut down completely. You may consider selling your business to a trusted buyer and helping them transition the day-to-day responsibilities. If you are not willing to leave your business, you can even add conditions to allow you to buy again.  

This may help you save your business's stake in the market. There can also be downsides to selling your business to any known or unknown buyer. There are chances that it may impact your relationship with them, and you may even have to compromise on the value of your business. Finding the right person who could potentially buy your business could even be a challenge.  

You may even consider liquidating and closing the operations completely in other situations. It can be a hard decision, and you should take it wisely. You can choose to liquidate and continue to pay yourself until the operations shut down completely. The other way could be selling the assets and getting money from them. Weigh the options and decide accordingly. Before closing your business, you should cancel all business expenses, file dissolution documents, pay employees in compliance with the laws, and file for the final taxes. Prepare the list in your business exit strategy and follow it accordingly.  

Small Business Exit Strategies

Here are some of the effective strategies that businesses can consider:  

• Look for a merger or acquisition. Mergers may increase your business's value as two businesses can be combined. The acquisition is a strategy for another company to take over your business. If you are not willing to let go of your business, you may opt for other strategies.   
• You may consider selling your business to someone you know. It could be your family member, employees, business colleagues, friends, or any other customer.  
• Go for Initial Public Offering or IPO and sell the business's stocks to the public. With this strategy, you may be able to secure more funds which may help you prevent debts and grow significantly. However, going public may not be the right option for small businesses. Companies may even require time and commitment to reach the level and opt for an IPO.  
• Liquidation could be another effective strategy for the business exit. Keep in mind that the liquidation value of the assets will go to the investors and creditors. It may be ideal when you do not wish to negotiate or merge with other companies.  

Whatever business exit strategy you choose, you should first evaluate the condition of your business. Keep the market conditions in mind as well. Be specific in your choices and choose wisely. Once acquired or sold, getting your business back may be challenging. Therefore, you should take your time to understand and learn about the pros and cons associated with the exit strategy.

How to Write a Business Exit Strategy Plan?

Include your exit strategy at the end of the business plan. It may provide you with complete direction and help investors evaluate whether your idea is worth the effort. Here are certain aspects you must consider while planning your exit strategy for the business.  

• Keep the business structure and size in mind.  
• Consider the options you have, in terms of finances, exit strategies, selling, or other key aspects.  
• Consider communicating the business exit strategy with your investors or stakeholders.
• Have an empathetic approach and make a plan on how you will be informing the employees or choosing the new leadership for the business.  
• Keep the economic and profitability aspect in mind while evaluating the condition of the business.  
• Analyze the competition to understand the health of your business.  
• Understand the time taken to reach the position to determine whether a business exit strategy would be the right decision.  

Most entrepreneurs do not pay attention and neglect having a business exit strategy. It is a critical plan that may provide a sense of direction during difficult circumstances. Here are certain approaches that small businesses can incorporate according to the condition of the markets. You must also have a plan on how you will inform the customers.