Exit Strategies For You to Consider

Are you ready to transition out of your current business, or even retire? If so, you should consider the different exit strategies that are available for your business - understanding how to properly manage and handle your business’s transition can help ensure that your legacy is preserved for future generations.

To help, we took a closer look at some of the most popular business strategies to consider, as well as all that you need to know to put your exit strategy into place.
 

What Is A Business Exit Strategy?

Creating an exit strategy for a business involves determining when to depart, how to successfully shift ownership and management, and what preparation is necessary to complete the process effectively. It is important to factor in any taxation obligations, legal requirements, and resource use for an optimal outcome.

Types Of Exit Strategies
There are several types of exit strategies to choose from, and the main options to consider include:

1. Selling to a Third Party:
One of the main exit strategies that many businesses opt for is selling the business to a third party - as the name suggests, this involves finding and negotiating with a buyer to purchase the business. The seller can either choose to find a buyer themselves, or they can hire an intermediary (such as an investment banker) to do the work for them.

• Pros:
  This exit strategy provides the opportunity to maximise the value of your business and enables control over the process. Additionally, it allows for flexible terms acceptable to both parties and means that you are likely to get the best deal in terms of value.
• Cons:
  One of the downsides of selling to a third party can be lengthy and complex and may require disclosing sensitive business information. Additionally, it may take time to find a buyer who offers the desired price for the business, which can delay you getting your hands on much-needed funds.
   

2. Passing Down To Family
This is one of the most popular exit strategies, as it involves passing the business down to a family member or members. This can be done either through gift transfers or selling the business at fair market value and allows you to maintain control over the company’s future.

• Pros:
  Passing down a business to family members can provide financial security and continuity, with less legal work and negotiations than would be required to sell the business. This also allows you extra peace of mind, as the business stays in the hands of the family.
• Cons:
  When passing a business down to family, it can be challenging to confirm that the successor has the necessary skills and resources to manage the business. There may also be potential problems if family members choose not to take ownership, and this can cause conflict and issues within the family unit, which have the potential risk of spilling out into the wider realm of the business.

3. Management Buyout
This option involves the existing management of the company purchasing the business from its owners. This could be beneficial in terms of creating an uncomplicated transition and preserving control of the company's future, as well as recognising key employees.
 

• Pros:
  The main benefit of a management buyout is that it allows you to maintain control of the company and ensure continuity. It can also give your team a sense of ownership, as they are now part-owners of the business.
• Cons:
  This exit strategy may not be possible if the current management lacks sufficient funds or resources to buy the business, and it can also be challenging to agree upon a beneficial price for both parties - this can lead to conflict within the company.

4. Merge Or Be Acquired By Another Company
Mergers and acquisitions, either domestically or overseas, and joint ventures are options to explore if you are considering combining your business with another or selling the business outright - the latter can be a great option if you are looking for an exit strategy, but want a ready-made company to take over your existing operation.

• Pros:
  Joining forces with another company can provide benefits such as growth and access to new markets, as well as diversifying revenue sources.
• Cons:
  This option can be difficult to negotiate and manage, as it involves handing over control of your business to a third party. Additionally, there may be cultural differences between the two companies that make the transition difficult. It is also important to consider any legal considerations that may arise during the process.

Choosing The Right Exit Strategy For Your Business
When deciding on an exit strategy for your business, taking into account elements such as the size of the company and desired level of control is important, as well as factors such as the current growth stage of the organisation. When making a decision regarding your optimum exit strategy, some key elements should also be considered, and these include:

Timing
When considering an appropriate way to end your business, it is important to consider the timelines of your plans. Selling to a third party in the near future may be more effective than family succession, for example.

Financial Considerations
Each option has an attached financial implication; for example, selling to a third party may have fewer costs compared to a family or management buyout, which could require additional investments. Make sure you weigh up the pros and cons of each option and choose a strategy that is financially viable for you moving forward, depending on your goals and future aspirations.

Legal Considerations
When evaluating exit strategies, it is important to consider the legal implications of each, as these can significantly influence the process. For example, a sale to a third party often entails more paperwork and negotiations than transferring ownership to family members.
 

Final Thoughts
When selecting an exit strategy for a business, it is necessary to take into account factors such as timing, financial considerations, and legal implications when deciding. Ensure that each option is thoroughly evaluated before reaching a conclusion.

If you are keen to sell your business, it is important that you have the support and guidance that you need to succeed - and we are on hand to help. With an array of waiting customers, experienced, qualified experts, and all the advice you need, Eden Exchange can make it super easy to sell your business, and move on to your next project. Get in touch today, and see how we can help.

Who we are

Eden Exchange is an integrated multi-channel platform, simplifying business buying and selling. We match, refer and connect business buyers, sellers & brokers in an ecosystem that facilitates frictionless franchise, business and finance transactions. Visit www.EdenExchange.com and connect with our engaged and multidimensional transaction network today.