Planning a policy to close your business may seem counter-productive to the effort you invest in maintaining the life of your small business, however, creating an Exit Strategy may be one of the smartest decisions you make, and you will thank yourself later for planning ahead. Creating an exit strategy does not necessarily mean you are planning to hang the “Closed” sign on your doors, and shut down permanently. Often, an exit plan is designed to set your business on course to sell to a buyer, pass on to family, or alleviate management stress from your own shoulders while maintaining the vibrancy of your business.
Keep Your Goals In Mind
Before you draft your exit strategy, envision your goals for yourself, and your business. Planning now creates more leverage for you, as the business owner, in how you wish to shift control of the business, and to keep your business in optimal condition for transfer. Consider the following:
- How involved do you wish to be after the transfer of the business? If you prefer a clean break, or complete relief of your obligations to the company at the time of transfer, then selling to a competitor, or another buyer may be a good option. Conversely, if you wish to remain involved in the business after transfer, you may consider transferring to a family member, or employees to retain some control of the process.
- Keep in mind your target buyer as you prepare to sell or transfer your business. Would you like to see your business retain the same, or similar identity and business functionality? You may want to keep employees or other small companies in mind as buyers. Selling to a larger, commercial company may have intentions to incorporate your business into their corporate identity, however, it may also ultimately be more profitable for you when you are ready to sell.
Prepare For the Essential Steps
Part of your Exit Strategy should include the steps you will need to take as you approach the transfer, or sale of your business. Exit Strategy steps generally include valuation of your business by an accountant, bringing your accounts as current as possible by collecting accounts receivable, and paying off business debt, and maintaining records as well as possible. It is helpful to hire an accountant, and a small business lawyer, to help you meet these goals. Additional preparation may include a plan for how you will delegate other responsibilities you take care of, and how you will notify employees and customers of your business transition to a new owner.
Whether you need a plan for implementation now, or much later, writing your Exit Strategy will give you piece of mind, and create a plan for your business to transfer to ownership on your own terms.
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