Will Deciding on Exit Strategy be Easy or Difficult?
For most small business owners, deciding as to how they exit will be easy, because they will have few options.
The majority of small business owners, based on research, will choose between selling assets to a third-party buyer or simply shutting down when they’re done being a business owner. To realize the maximum number of options for exit, an owner needs to invest both time and money, and few do this systematically and strategically over time with the end in view. The result is fewer options for exit and a forced “easy exit decision”.
Those of you who do plan, build a business that is transferable, and hence have more exit options, might be (in a good way!) further challenged when making the final decision as to what exit path to execute.
Betty founded her business over twenty years ago, and was strategic in her approach to building a transferable business and planning for her eventual exit — she continually had the end in view when planning for business growth today. From the beginning, Betty’s plan was to eventually sell to a third-party buyer and that is absolutely a current possibility as she’s recently been approached by a few potential buyers. Betty would now like to leave completely in the next 2-3 years, so a sale with an earnout could be the answer.
However, Betty now has other interests and goals, in addition to her financial goals — she has two children in the business that have shown interest and promise in being future owners — Betty would very much like to see the values and culture of the business sustained in the future — and finally, she’d like to ensure the future of key employees who have helped her grow the business through the years. These “values-based” goals more align with either an ESOP (Employee Stock Ownership Plan), sale to a key employee group, or transfer to the children.
The good news for Betty has many options for exit, so she can give legitimate and serious consideration to all of her values-based and legacy goals.
More challenging for sure, but good challenges as Betty has the flexibility to accomplish all of her goals in choosing the best-aligned exit strategy. She is not limited as to her options — Betty is positioned to do a third-party sale, sale to insiders, an ESOP, a transfer to children, or a combination.
Betty is again enjoying the benefit of having an experienced and trained Exit Planner assist in thinking through all the pertinent issues.
In Betty’s case, there is an understanding that having a “tough exit decision”, is actually a good thing because it’s due to her various exit options and goals. Betty’s Exit Planner helped to get her to this point and is again adding value in designing and implementing the final decision. She is grateful for the exit options available to her and the flexibility for personal goal attainment which are the good fruits of wisely investing in a strategic exit plan from the inception of her business.