Exit Options – Early Planning Offers Greater Choices / by

To achieve a successful exit, you must follow through and implement every plan outlined above. This stage is very straightforward but ends up being the hardest because it takes consistency, focus, commitment and dedication to the endgame while still consumed with 90-day operational plans too. It’s a lot of work. For best results, don’t try to do it all on your own.

Exit Options

There are tradeoffs for every exit strategy you consider. The chart below may be useful in exploring which options you want to consider. Each exit option can take your business to its next stage. You must evaluate how each option allows you to achieve your exit goals. It may be that there are elements of different options you want to consider or combine. Your exit can be as unique as the business you’ve built, the team that surrounds you, your core values and culture; and your leadership. As you guide the transition of the business to its next stage, you may end your involvement and get out, or define a new role to remain with the business in some capacity.

Exit
Options

Definition

Seller
Benefits

Seller
Drawbacks


Merger with another company

Your company joins with an
existing company.

You may receive cash and/or
stock, resources of the two companies are combined, and some of your
management team may be kept on.

The new owner/manager may have
different ideas of how to run the business, your existing team may not
have the control they had under your leadership, merging the two
corporate cultures may be challenging


Acquisition by another company

Your company is bought out by
another existing company.

You may receive cash and/or
stock for the sale. You may be required to stay on in some capacity for
a specified period of time for transition.

Your corporate brand and
identity may or may not be preserved. The fit may not be perfect for the
business or your team.


Sale to a Strategic Buyer

A strategic buyer who wants to
run the company buys you out.

You may receive cash immediately
or structured over a set timeline.

It can be difficult to find the
right buyer, at the right price on your schedule. Change of
ownership/leadership may be difficult for employees and management.


Sale to a Financial Buyer

A financial buyer who wants to
add your company to their portfolio of managed companies

You may receive cash immediately
or structured over a set timeline. You may be required to stay on in
some capacity for a specified period of time for transition.

Financial buyers are looking at
the numbers and how to get a good return on their investment. How they
want to do that may be difficult for employees, management and clients.
There may be a clash of culture and values.


Franchise the Company

If your business is
replicatable, this allows you or new owners to expand locally,
regionally, even internationally.

You receive cash from each
franchisee, your current management team and structure are maintained.
Franchising is an opportunity for large-scale growth

Franchising takes time. The
process can be difficult and time –consuming. Not every business is a
viable candidate for franchising


Employee Stock Ownership Plan (ESOP)

Employees shares or stock of the
company over time.

Employees are rewarded for
contributions, receive incentives for longevity and share in the profits
of the company they helped you grow.

Employees may lose their shares
if they leave the company, employees share the burden and risk if the
value of the company goes down.


Management Buyout

Some or all of the existing
management team buyout the owner. This is one version of a group buying
the company instead of an individual strategic buyer.

You may receive cash immediately
or structured over a set timeline. You may be stay on in some capacity
for a specified period of time for transition.

Managers may
not agree on how to run the business without your leadership.
Negotiating a transaction may include many more factors and conditions,
as the buyers are also the team being valued.


Initial Public Offering (IPO)

Shares of the company are sold
publically on a stock exchange.

Shares convert to cash for the
owner and any initial investors. Major shareholder control the company.
Investors expect to see a potentially high return on their investment

The company must deliver nigh growth to generate earnings and interest
for investors, IPO costs are very high, IPOs offer a very uncertain
outcome for owners or investors.


Succession

Someone inside the company,
inside the family or hired in is trained and groomed to succeed the
owner

You handpick your successor on
your terms

You are dependent on the effectiveness of your successor to ensure the
company can pay you (cash, annuity, payment schedule) and sustain the
company moving forward.


Close the Doors

Cease operations and liquidate assets

Minimize losses, quick exit.

Without any effort to monetize revenue streams or intellectual property,
you eliminate any chance to profit from the business

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