Baylake Bank eNews. Member FDIC

If You Have a Business, You Should Have an Exit Strategy

Father and sonSo you have successfully started your own business and have it up and running. Have you also planned your exit strategy? Many business owners who are working for themselves for the first time answer this question with an emphatic “no.” However, it is critical to remember that every owner will eventually exit their business, and just like an employee making long-range plans for retirement, you should consider and plan for what happens next.

Not having an exit strategy before, or very soon after, starting or buying a company is a risky proposition. An exit strategy is very important to your personal as well as your business plan. It prepares you for the long-term future, and also helps you handle the unexpected, such as an unsolicited offer for your company to be bought out, or a health issue that prevents you from continuing to run your business.

Knowing how you want to exit your company, and having a tentative target as to when, will allow you to build it successfully. Exiting can include selling to an outsider, an investor, a partner, an employee, or a family member. It could also mean not completely leaving but just selling, or sharing enough interest to relinquish day-to-day control while still maintaining an income.

Without planning for these things, you will probably not have an effective structure to get full value for your company, or be ready to share it with a family member. Having a consultant help you establish an exit plan is usually a very good idea. Here are a few of the many things to consider:

• How would you like to exit your company (full sale, partial sale, asset sale, etc.)?
• Who would you like to sell your company to (competitor, experienced owner, family member, etc.)?
• How long are you willing to stay on to help the buyer?
• What is your target profit on the sale after paying off any debt?
• Are you willing to hold a note for the buyer?
• What are your plans for your employees?
• What do you want to do once you are no longer involved in the company?
• Where will your income come from once you exit the company?

Setting yourself and your company up to reap the rewards of your hard work, and to retire or move on to other ventures, is not something to be taken lightly. Whatever the reason, be smart about how you make your exit.

More information and tips on planning your exit strategy are offered by the Small Business Administration at http://www.sba.gov. Or, contact a Baylake Bank Business Banker.

 

 


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