As a business owner, you need to have an exit strategy to secure your financial future. Instead of waiting until you want or have to stop operating, you should establish an exit plan when you are starting your company. Leaving a business can be extremely stressful but having a detailed exit plan can make this process easy and quick.
6 steps to preparing an exit plan
- Consider your options
The main options to consider for your exit plan are selling your business to a new owner or liquidating and closing the business. You have to think about which option you think will be the best if one day you can no longer run the business. If you decide that you want to sell your business as an exit strategy, you have to think about who your target buyer will be. It can be a family member, a friend, or a stranger investor.
- Decide how fast you want to exit
If your target buyer is a family member or friend, they might not have enough finances to take over the business right away. If that’s the case, you might make a decision about closing the business and then wait for them to be able to take it over. If, however, you want to exit the business right away, you might have to sell it on the open market.
- Prepare the finances
Before you close down or sell the business, you have to make sure that you have clean and accurate financial records. If your bookkeeping hasn’t been organised, you have to fix it before you hand the business over to someone else.
- Talk to investors
You have to think about how you will repay your investors. When you are ready to close the business, you also have to approach them and tell them about your plan.
- Inform employees and customers
When you develop succession plans, you have to tell your employees and answer their questions. You also have to think about how you will inform your customers about your decision. If you are closing your business for good, you should suggest to your employees as well as customers what their options are now.
Should I close completely or sell?
As we mentioned before, the main strategies if you want to exit are selling your business or liquidating and closing it.
The biggest advantage of selling your business is that your company will live and someone might continue your legacy. If you decide to sell the business to a family member or friend, you are handing the business over to someone you know and trust. Nevertheless, the downside of this solution is that business owners who sell their companies to people they know often end up selling them for less than they are worth.
If you decide to liquidate your business, you can keep paying yourself until your business funds finish and then closing the company up for goof. The biggest downside of this solution is that you have to completely close the business you worked so hard to build. The biggest advantage of it, on the other hand, is that you can still make some money after you decide that it is time to exit the business.
Which option you choose for your business plan comes down to what you think would be the best for your business.
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