Just as you had a plan for starting your business, you should also have a plan for closing or transferring ownership when you retire, die or become disabled. The plan can allow a gradual or quick way for you to exit your business, depending on whether the business is sold or continues without you.
Set Exit Goals
No single exit strategy is the correct one. Instead, what works for you depends on many considerations, including whether you want to sever ties completely or maintain some control, whether you need the cash that selling the business would provide and whether the business has enough long-term profitability potential. Assess your personal situation, consult with senior managers and key employees and take advantage of free resources, such as information you can get from the Small Business Administration and from SCORE, an organization that provides free help and advice to small-business owners, to set appropriate exit goals.
Know Your Options
Although closing the doors and walking away is a common exit strategy, it isn’t the only way to go. You could also become a silent partner, transfer ownership to family members or your employees or sell the business to another company. Each option has its advantages and disadvantages, and only you can decide which option is best for your business, your employees and you. The SBA website has lots of information on each of these choices.
Create a Plan A and B
Although you can’t plan for every possibility, an exit strategy should consider more than one possibility. For example, if you’re in reasonably good health and your business is profitable, chances are that you’ll exit when you retire. However, you could become disabled or face a health crisis that would mean exiting the business immediately. Therefore, if the preferred exit strategy is to transfer ownership to a family member, consider an alternative that will allow the business to continue if you should die suddenly and the named family member is unwilling or unable to assume ownership.
Consider Your Timeline
Write an exit strategy that fits your timeline. For example, succession planning requires a great deal of thought and long-term planning. Although the size and complexity of your business and the knowledge and experience of your named successor matter, according to SCORE, succession planning takes about 15 years from start to finish. On the other hand, while selling or closing the business still takes some planning, it generally is a much quicker process.
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