Many people liken running a business to raising a child, especially if it is your own startup company you built from scratch. But whereas children will eventually grow up and leave the nest, the parent of a business is instead the one who eventually must leave. You can’t run your business forever, no matter how successful it may be, and you very likely won’t want to run it, anyway. A lot of small businesses start off as a dream on a pad of paper, become a reality, and then become a bore for the entrepreneur who lives for that next challenge.
When it comes time for you to step away from your business, no matter the reason, do you know how you’re going to do it? Planning way ahead – like years and years ahead – can save you from running into a brick wall of complications later, or from getting trapped with a company you no longer have an interest in. If you need to think about your eventual exit strategy, consider these five common methods:
- Mergers & acquisitions: Look for a company with similar products or interests as you and see if they would be interested in a merger or acquisition; this could even mean pairing up with someone you once saw as a competitor, as long as you don’t create a monopoly. If you are both about the same size, it is considered a merger; if a larger company assumes control of a smaller business, it is an acquisition. You can use this strategy to leave your company gradually by putting more and more responsibility on the other business you do not outright control.
- Initial public offering (IPO): If you believe your business has a unique product that the public will be interested in, use an IPO to sell shares of it as stock. When more than your share is purchased, you are no longer the sole controller of the company and you should have made a considerable profit. Once company executives or a board is established, you are essentially free to step out of the spotlight whenever you please, especially if you sell off your own shares.
- Friendly sale: You can think of a friendly sale almost like the biggest garage sale item imaginable. After finding a business owner or entrepreneur that shares your vision or has a genuine interest in your company, you may sell it with a comparatively simple exchange of currency for control. It is wise to back any purchase or selling of a business with contracts, just in case someone tries to change their mind last second or disputes the agreement later.
- Lifestyle company: If you have only recently started a business and aren’t sure you are going to be committed to it in the long run, you might want to make it a lifestyle company. Entrepreneurs consider a business a lifestyle company if the majority of the profits go straight to the owner, there is no venture made to expand the business, and expenses are kept at the absolutely minimum possible to keep running. Most lifestyle companies are family-run or quite small, as they are essentially-destined to shut down and dissolve sooner or later.
- Liquidate: Sometimes the end of a business is just that: the end. You don’t need to overcomplicate matters by searching for investors who aren’t interested or new buyers who aren’t there. Instead, all you need to do is shut the doors and close up shop for good. If you sell physical products, you should liquidate your inventory quickly – think of the big red “going out of business” signs you see on the side of closing shops – to pay off creditors, shareholders, and yourself.
Be Smart from Start to Finish
When you know you want out of owning your business, it can be tempting to drop everything as fast as possible and metaphorically abandon the ship. Your business exit strategy is just as important, if not more important, than the strategies you used when you were running your business, though. Cutting ties and getting hasty now is akin to tripping right before the finish line of a marathon.
Make certain your exit strategy works for you, and not the other way around, by teaming up with Buckley Beal LLP and our Atlanta business litigation attorneys. We bring together more than 85 years of collective legal practice and knowledge with a deliberate focus on business litigation to your case that creates a simply unparalleled client experience. Call 404.913.7415 or contact us online to request a free initial case evaluation today.