How to prepare an exit strategy for your small business

You may wish to part ways with your business for a number of reasons, whether you’re a serial entrepreneur, or perhaps your business is struggling and you just want to move on. Either way, an exit strategy for selling the business is key. Here we look at ways to do that, with an emphasis on ensuring you get as much money out of the business as possible.

Liquidation of the business

The easiest way to exit, this is simply a case of closing the business and attempting to sell everything. This method however will likely lead to the lowest return on your investment, and is therefore the least desirable method. There may also be knock on effects such as reputation damage or damage to your clients.

Selling your small business

Whether it’s to a family member, friend, or another business, you have numerous options – the key thing to selling the business is to ensure it’s left in as strong a position as possible, to make it an attractive investment. For example, a competitor may wish to eliminate your business from the market by buying your business, and will therefore offer a good price. Just make sure that whoever you’re selling the business to is reputable, to ensure that your existing employees and customers are going to be left in safe hands.

Selling your business to your employees

This method can be great for ensuring the legacy of the business lives on, with few changes (at least initially) to the workforce and customer relationships. Just make sure that whoever is set to take over, knows the business well and is likely to continue to run it with maximum efficiency.

Initial public offering (IPO)

Usually designed for larger businesses, this is a long-term exit strategy for businesses, so is not designed for those looking for a quick sale. The biggest benefit to this method is profitability, but it can be a costly, lengthy process to get there.

Closing comments

With a number of possible exit strategies for your business, ultimately it depends on your circumstances – whether you’re winding down to retirement, moving on to another business, passing it over to a family member or selling to another company. Just make sure to start planning as early as possible, in order to maximise the value of the sale and therefore the return on your investment.