There may come a time when you need an exit strategy from your business. But what is the best way to do it? What you choose will depend on your business goals and why you want to exit the business or if you want limited involvement in the business.
Following are different types of exit strategies to consider.
Selling your business
Deciding to sell your business can be a difficult decision after all the heart and soul, and money you have invested. You may even have family members involved so the business could be a positive point of connection between you all. Life after selling the business may be hard to imagine.
Or being a business owner may have been way more stressful than happy, making selling easy to embrace. Remember, selling the business is final so you only get one chance to get it right. It will be important to sell for a good price to make the sale financially worthwhile. But the market conditions or a poorly planned strategy can make it difficult to get the right price.
Merge with another company
Merge with another company to combine the two businesses. The competitive landscape may drive strong companies to seek out other companies to create a more cost efficient, competitive operation than the two businesses are on their own.
A merger does not mean that the size of each company needs to be equal. What matters is that the board members of the companies decide that continuing to work alone is not beneficial, and that a merger would benefit everyone.
Planning for succession
When you own a family business, you may want to pass it on to a family member. Or you may want to sell or pass the business on to your employees. This can be an emotional process that needs planning and working together for success. It is critical to have a succession plan, which usually has two main factors:
1. Asset transfer. Consider how you will transfer assets and their value to family members over a set amount of time.
2. Power transfer. Consider how to transfer control and management of the business to family members and set a timeframe.
Succession planning is complex. It is important for all parties to get expert advice when creating a succession plan and setting up a new ownership structure to ensure that everyone benefits.
Dealing with insolvency
Liquidating your business may be the only option if you are dealing with insolvency.
Your business may be insolvent if you do not deal with financial issues quickly while there are still options available. If you do not know you have a financial problem, or you did not take action when you found a serious problem, your only choice will be liquidation.
This involves the appointment of a liquidator to finalise the affairs of the business such as selling the assets or the business itself. The liquidator will then pay out any debts .Liquidators also investigate directors decisions in the lead up to the insolvency. They will look for unreasonable transactions, breaches of duties and trading while insolvent. These are all things that directors can be responsible for repaying in Australia.
Liquidation occurs when a company s creditors vote to liquidate a business.
Shutting the doors
It may be simplest to just shut the doors and walk away after selling any assets to pay off business debts and keep any money left over. This may be the best solution when the business cannot operate without your skills and selling it is not really an option. You may just shut down the business if it does not have much goodwill or you want to stop operating the business quickly.
Explore all your options before making a decision to just close the business.
If you need help, Ben has the experience to help you plan your business exit strategy. To discover how he can help you, make an appointment to discuss your business support and accountancy needs.