What Is An Exit Strategy?

Sarasota Sell A Business | Manatee County Financial Corporation

While every business owner initially enters the market with a plan to start and survive, many business owners miss out on a critical part of their planning early on: what will happen when I cannot (or ideally choose not) to continue with this business? Whether you succeed beyond all expectations with your business and are looking to sell or hand over management, or if the unfortunate and unexpected occurs and you are no longer able to continue, appropriate planning can save all manner of headaches… and money.

sarasota selling a business

Planning an appropriate exit strategy should involve answering at least two critical questions: “What will I want if everything goes well?” and “What will I want if things go poorly?” While no one can predict all eventualities, asking yourself these questions (formally, as part of your business plan) should help avoid improvisation and less-than-desired outcomes.

Every business is different and your exit strategy should reflect the unique nature of your business. A sole proprietor’s exit strategy, for example, may require little more than retirement savings and potentially a continuation of liability insurance coverage post-closing. Members of a partnership, meanwhile, may intend to sell their shares to continuing partners and “cash out.” Other entrepreneurs may hope to exit their business through an initial public offering (IPO) in which they maintain some level of oversight without having to be involved in everyday operation. In each case, agreeing to terms with other stakeholders before outside pressures come to bear is definitely sound advice.

Besides planning for the best outcomes, business owners should also have a plan in place for the unexpected. Does your business require your physical presence everyday? If so, planning for your absence is an absolute necessity. Happily, the U.S. Small Business Administration (SBA) and the Internal Revenue Service (IRS) offers important advice on choosing and training your successor in case of death or disability and closing your business, respectively.

Although many venture capitalists and other investors require an exit strategy as part of any business plan before they invest, you may already be operating and asking yourself these questions for the first time. If this is the case, important considerations are what, exactly, are your profit objectives before you exit? Do you have a contingency plan for catastrophic events or even personal considerations like estate planning or divorce? Finally, how can you exit your business while limiting losses, both to yourself and to what you may hope to be your business legacy?

For more information stop in and see our Sarasota Cunsultant today!