Regardless of where you are in your business journey, it’s never too early or too late to think about choosing an exit strategy.
While yes, business exiting is a very complex and tedious process, it doesn’t have to be so intimidating.
The process is a lot less scary when broken down into bite-sized pieces of information.
Today, we’re going to start by diving into the different options available when choosing an exit strategy.
Understanding the different types of exit strategies
Some of the most common exit strategies are: liquidation, Initial Public Offering (IPO), merger, acquisition, and selling to someone you know.
The strategy that’s best for your company will depend on several different factors; such as your industry, strategic goals, and financial goals.
Liquidation is a great exit strategy for small businesses that are solely dependent on one individual and are on the verge of bankruptcy. This is one of the fastest ways to exit a business and is most common for companies that need to close quickly to minimize the amount of money lost.
Profits made through liquidation will come from valuable assets like equipment and land, but will first be used to pay creditors.
An IPO is best-suited for large corporations and startups. This strategy involves convincing both Wall Street investors and analysts that stock in your company is worth something to the general public.
Merging your business with another will increase its value and pique the interest of potential investors. This option is best for business owners who aren’t looking to leave their business entirely and still want to own or manage it in some capacity. The most common types of mergers are:
- Conglomerate- The businesses being merged are complete opposites.
- Product extension- The businesses have similar products.
- Market extension- The businesses being merged sell the same products, just in different markets.
- Vertical- The businesses are a part of the same supply chain.
- Horizontal- The businesses being merged are in the same industry.
An acquisition is commonly known as a “merger and acquisition,” because the buyer who’s acquiring your business will oftentimes decide to merge your products/services into theirs. This strategy is appropriate for businesses of all sizes.
The best part about an acquisition is that you can sell your company for more than it’s worth, so long as you work with an M&A specialist like NBS to get the strategic alignment just right.
Selling to someone you know
If you’ve built a business with a legacy that you want to see live on long after you’ve exited, you might want to consider selling it to someone you know and trust; like a family member, friend, or employee.
Oftentimes when you know the buyer, you can negotiate a deal where they pay the business off gradually. This will allow you to keep a steady income while the buyer runs the business without making such a large initial investment. These relationships also allow you to mentor the buyer, making the process quicker and easier for everyone.
If you decide to go the family succession route, you’ll need to be extremely cautious. We strongly advise against this route, as selling to family members can often cause lots of friction and might end up being your worst nightmare. You’ll need to involve attorneys, family successors, and accounts for a seamless transition.
Choosing an exit strategy doesn't have to be so overwhelming.
At National Business Search, we’ve been helping business owners successfully exit for over 40 years now.
When you hire a business intermediary like us, you can rest assured that no money will be left on the table.
If you’re pondering selling your business, let us help you figure out if the timing is right, or if you’ll end up with more money by waiting and fixing a few things first.
It all starts with a free business valuation from us.
Just fill out this form, and we’ll reach out to see if we’re a good fit for each other. If not, we’ll at least point you in the right direction.
Got questions? Don’t hesitate to contact us!