How to Develop an Exit Strategy for Your Business

Even if you’re years away from calling it quits, it’s wise to start thinking about an exit plan to ensure you get your desired retirement results

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It’s often said that entrepreneurs should start their companies with the end in mind. Even amidst the enthusiasm of seeing a new venture get off the ground, it’s wise to look ahead to the business’ most logical endpoints.

There are a few reasons why exit planning is important. If you ever want to sell the company or take on investors, you’ll need to provide some sense of where the company is headed. An exit strategy actually creates value within the business.

Additionally, your exit strategy can have personal implications. For example, are you going to pass down your company to a new leader one day or sell the business and use the proceeds to retire? That simple choice obviously has a lot of relevance for your own long-term financial plans.

There are plenty of options for one day exiting your company. Some of the most common examples include:

  • Let the company run dry. This is mostly for sole proprietors. In the years before you plan to retire, increase your salary. Maybe even give yourself a bonus. And make sure you pay off all your business debts. Then, once the company has naturally run its course, liquidate any remaining assets and call it a day.
  • Sell shares. When you’re ready to retire, simply sell your shares in the business to someone else.
  • Liquidate. Take everything the business owns, sell it at market value, use the proceeds to pay off debt and hope you have some left over for yourself.
  • Go public. Work toward one day having an initial public offering, selling shares in the business to anyone who wants one. This isn’t as common in the home service industry, but it is at least worth mentioning.
  • Sell the company. Selling outright can often be the simplest way out of a business. Assuming your business remains valuable, it can also give you a nice cushion for your retirement or for launching a new endeavor.

Key considerations when exit planning

As you determine which of these options is best for your business, there are some key questions to ask yourself:

  • Does it matter to you whether the business outlasts you? Do you want something you can pass down to a son, daughter or trusted employee?
  • How long do you want to be involved in the company? Are you looking for long-term involvement, or are you hoping you can sell soon and move on to something else?
  • What about your personal retirement savings? Will you be dependent on the proceeds from a business sale?
  • How much is your business worth? It may be a wise investment to hire a business consultant to perform a valuation and help you make some projections about how much the business will be worth in 10 years, 20 years, etc.
  • Who will take over? If you plan to pass on the business to someone else, you’ll need a succession plan.

In answering these questions, you’ll be well on your way to outlining the basics of an exit plan and creating a general sense of where things are headed for your company.

About the author

Amanda E. Clark is the president and editor-in-chief of Grammar Chic, a full-service professional writing company. She is a published ghostwriter and editor, and she's currently under contract with literary agencies in Malibu, California, and Dublin. Since founding Grammar Chic in 2008, Clark, along with her team of skilled professional writers, has offered expertise to clients in the creative, business and academic fields. The company accepts a wide range of projects; often engages in content and social media marketing; and drafts resumes, press releases, web content, marketing materials and ghostwritten creative pieces. Contact Clark at www.grammarchic.net.



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