Many people are always interested in what it’s like to start a business. There’s so much information, courses, and even Masters Degrees on how to own, run, and manage a business. But have you ever considered what it might look like to sell your business? Believe it or not, knowing some business exit strategies are an important part of being a business owner—especially if you’re wanting to keep the legacy you created alive and well.
According to a survey by the Business Enterprise Institute, almost 50% of business owners decide to sell their business to a third party and 79% of business owners haven’t created an exit plan whatsoever.1 Let’s talk about why having an exit plan is essential and what steps you can take for your own business.
Why Business Exit Strategies Are Important
Maybe you own a family business, but you’re the last family member in line who wants to run it. Or maybe you’ve started a successful business but have lost the passion that you once had to keep it going. Whatever the case may be, exit planning for your business before it’s time to say goodbye may keep you from experiencing seller’s remorse later.
In fact, a study by the Exit Planning Institute found that 76% of business owners who sold their business experienced profound regret one year later.2
A good business exit strategy helps you value your business properly so you can sell it for what it’s worth. It also helps you walk through the tough emotions of grieving something that you may have poured so much of yourself into for so long. Many business owners don’t realize that experiencing grief is a very real part of the selling process as well. A good exit planning strategy also walks you through the emotional aspects of selling.
Three Types of Business Exit Strategies
With something so important as your business, creating a plan for the future before it gets here should be at the top of your to-do list. If selling your business is in the cards for you, here are some examples of exit strategies to help you start preparing for a healthy exit.
1. Find a successor.
Many business owners love this option because it means they get to choose their level of involvement after the sale. When you decide to use a succession plan as an exit strategy, you can start training an employee to take your place.
2. Sell to a third party.
This is a great option if you’re looking to get out of the business with zero strings attached. When you sell to a third party, you won’t have a say in how they run things after the sale. This is a great option if you’re looking to sell the business outright and (hopefully) make money on the sale.
3. Keep it in the family.
Maybe you’re the fourth-generation owner of a small business and your kids are interested in taking it over. We all love these kinds of business legacies. When you’re selling to your kids, just note that they may not be able to pay fair market value for the business without a plan. If you have multiple children, you’ll have to make sure that you sell the business or divide duties up fairly. Your financial advisor will be able to walk you through something called estate equalization. This process will designate some of your children as “business active” and others as “non-business active.” These designations help divide up the business as an inheritance once you pass away.
There are a lot of positives and negatives to each exit strategy. But a financial advisor can help you learn about each strategy and come up with the best one for your family, your business, and your circumstances. A seasoned advisor will be able to help you set up a plan, walk you through it, and be there with you each step of the journey. Don’t wait to start planning your exit. It’s just as important as planning your retirement. Talk to a SageSpring Wealth Partner today . . . we’d love to help you leave the legacy you’ve always dreamed of.
