Choosing the right exit strategy for your business

Many business owners will have been told that when you set up your business, you should also establish an exit strategy.

However, research has shown that only half of business owners have an exit strategy in place.

Whilst some business owners may not feel like they need an exit strategy, others may be uncertain which strategy is most suitable for them.

In the first blog of this series on exit strategies, we are looking at how you can choose the right exit strategy for you and your business.

What is an exit strategy?

An exit strategy is a business owner’s plan to leave their business. This can be done through either selling the business (or part of it) to another party or retiring and passing the business on to the next generation.

There is no one-size-fits-all exit strategy. Each strategy is useful for different people and depends on why you are leaving your business in the first place.

There are eight common types of business exit strategy that you can choose from:

·        Mergers and acquisitions

·        Earn out

·        Gifts of shares

·        Company purchase of own shares

·        Management buyout

·        Employee Ownership Trusts

·        Succession

·        Liquidation

Which of these will be suitable depends not only on your business, but on your personal goals too.

Why are you exiting your business?

The key component to deciding your business exit strategy is why you are, or would be, leaving your business. If you haven’t thought that far ahead yet now is the time.

Understanding why you may want to leave your business is key to ensuring a smooth transition. To help you make a decision, you should consider:

·        The type of business you own

·        Your personal goals

·        What you plan to do after leaving your business

·        Your management, staff, and employees

·        Other investors in the company

For example, if you are leaving your business for another venture, you are more likely to seek out an exit strategy that offers a return on your investments.

Alternatively, if you run a family business, the natural exit strategy would be succession.

You could even face yourself offered an exit strategy by interested investors or your employees. In this case, you could set up a strategy that suits you, your business, and your staff.

In the upcoming blogs of this series, we will take an in-depth look at the different business strategies and how you can apply them to your business plan.

If you would like more guidance on business exit strategies, please get in touch with the team at Iceberg Accounting.