Choosing the Right Business Exit Strategy
A business exit strategy is a business owner’s plan to sell their investment in their company in order to either make a profit or limit losses, depending on the level of success of the business. A good entrepreneur will have already conceived their particular exit strategy and defined it in their business plan. This is because an exit plan may play a significant role in choices regarding business development. Business owners may choose from the following exit strategies and more:
- Initial Public Offerings (IPOs) – An IPO is when a private company’s stock is made available to the public for the first time. This particular exit strategy is geared more toward smaller companies because they’re more likely to not offer stock and because of how few IPOs are successfully executed in one year in the U.S.
- Mergers and Acquisitions (M&A) – You may choose to sell to a buyer who wants to purchase the company for a specific reason, most often because they find that your company will make a good fit with their other existing business(es).
- Management Buyout – This occurs when the current owner of a business decides to sell the company to his/her managers. This way, the managers are able to reap the rewards of owning a business, instead of just being employees. This is typical among larger corporations because of the exorbitant cost of purchasing a company.
- Liquidation and close – This is a fairly simple exit strategy in which the owner decides to close up shop, so-to-speak, and sell everything to make a profit.
Whichever strategy you choose, it should be well thought-out and defined in your business plan. You should always consider how your exit strategy might affect your business decisions, and plan accordingly.