The main exit scenarios for business owners are:
- Sale of the business
- Close the business
- Accident, illness or death
A sale of your business could be achieved through placing the business on the market or through an internal sale to an employee. The best outcome is likely to occur if the sale is carefully planned. This will allow you to exit on your own terms, according to the most desirable timetable and in an orderly way. A planned sale is also likely to result in a higher price being achieved than a forced sale.
In the case of succession planning, the owner needs to decide who will take over the running of the business. Usually this will be a family member. The choice of who should take over should be made on a rational, rather than an emotional basis. Consider if the person has the personality, skills and knowledge to manage people, run the business and grow sales. If the candidate has the personality to do the job, but lacks the skills and knowledge, a training program should be developed and implemented.
Sometimes the owner will want to simply close the business. This option can often result in assets been sold at firesale value. As a result, this type of exit usually does not maximise value. It can also often hurt the pride of the former owner.
For some businesses, closing the business is a natural end. This is often the case with small owner operated businesses. In these instances, quite often the owners are the business. The owner may have deep personal relationships with all customers and may have very specialist knowledge. Once the owner is out of the business, the business ceases to exist.
Occasionally an accident, illness or death affecting a key staff member can mean the end of a business. Owners can help prevent this by making certain that key skills and customer relationships are shared among more than one staff member. This will help ensure that the business is able to continue if key staff members are no longer able to work in the business.
Overall, careful planning of your exit is essential. This will ensure that you are able to achieve the best possible financial outcome and an exit that is on your terms.