Planning Your Exit
“Know when to fold ’em, know when to hold ’em, know when to walk away, know when to run. . . “
When I think about business exit strategies I think of the old Kenny Rogers song The Gambler. While Rogers is talking about playing cards and knowing when the right time is to get out of the game, he might as well be talking about business, because the concept is the same.
The reality is that there will come a time when every business owner needs to come up with a plan of how he/she will make an eventual exit. The execution of a successful exit strategy could take many forms. It could be as simple as handing over the reins to a family member or a hand-picked successor. Depending upon your business size, strength and success other exit strategies could be an IPO(Initial Public Offering) or an acquisition with a competitor. Unfortunately, exit strategies should also include plans for your demise, illness or bankruptcy. No matter what the exit direction may be, making a blueprint for the end is something every business owner should consider.
Most small business owners have spent countless hours focusing their energies on business survival and future growth not on an exit strategy that has some vague date and time stamped on it. The reality is that every small business owner should have a game plan for exiting the business due to retirement, illness or merely passing on the torch. Even if a business is in growth mode, financial and legal plans should be in the works for anything unexpected happening.
The United States Small Business Administration (US SBA) has put together a great resource on preparing for an exit no matter the cause or eventual direction the company may take. Read more on their page “Getting Out.” They suggest detailing each element of your exit including:
- Financial Planning – Selling, dissolving or transferring the business takes a lot of paperwork. The US SBA suggests keeping detailed financial records for years(up to 10 years) prior to a planned exit.
- Human Resource Planning – What is going to happen to your loyal employees once you are no longer the leader of the company? Take into account their legal rights and needs prior to leaving. Meet with a Human Resource Expert to handle employee coverage.
- An Operations Plan – There should be contingencies put into place if a transfer of ownership is taking place that will assure clients that the company will be keeping all of its legal and contractual obligations.
- A Succession Plan – There are a number of legal, financial and estate issues that should be pre-planned. What will happen in the case of a sudden death or injury? Who would take over?
Exiting a business is not usually as easy as closing the doors. Before you embark on your exit strategy, be sure to engage your lawyer and even a business evaluation expert. That way, you will be sure that you have explored all the options available to you.