Business exit plans or business exit strategies are methods of cashing out investments. When a business is derived, the home business plan stipulates or charts the way for a home business venture to perpetuate and possibly grow, thus adding value to itself. An exit strategy is usually included and defined in the business plan format which are available online as part of the business strategy.
This is essential because at some point home business venture owners, entrepreneurs or venture capitalists would like to part ways with a company in order to harvest their investments. Some investors may decide to exit a company to pursue other interests. Some may opt to retire. And others could be forced to part with a company due to illness or some other tragic circumstances. In any case a clear exit strategy will help reduce the problems which might hinder a successful exit.
3 Common Types of Exit Plans
Succession
This option is popular with business owners who have kids and would like to hand over the business to them in 30 years or so. However, there is no guarantee that the offspring would be interested in the business when the time comes. Business owners with this exit strategy should try to get their children interested in the business from an early age through involvement to increase the probability of them being interested in taking over the business later on.
Liquidation
Business owners or sole proprietors usually decide to close their doors for the last time when:
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For some reason, a business owner has to retire and all other options are found to be not viable.
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A business is too dependent on a certain skill the owner posses rendering it unfeasible to handover the reigns to a family member or buyer.
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No one is interested in taking over or buying over the business.
Please note that before a business is legally allowed to close it must first meet all the legal requirements. Such requirements would include paying off all outstanding liabilities and meeting all other obligations. Sometimes, after settling all outstanding amounts and selling all assets, the sole trader is not left with mush.
In addition, liquidation will destroy the value of the business reputation, business links and client lists which the business has built up over the years.
Acquisition
This can happen either through management or employee buyout or via a sale to another business. Before a sale can be made, the business must first seem to be an attractive investment. Most businesses are bought up because they possess a particular strategic advantage that would give the buyer a synergistic value when acquired.
A business will seem more attractive if:
- The business is seen to be continuously making a profit
- The business has money making products or services
- The business has solid customer base due to its ecommerce affiliate programs
- All business assets are in good condition
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Brad Keet is an entrepreneur and Internet junky. Brad invites you to journey with him as he dishes out home business startup tips and other home based small business information. For more of Brad’s take on things, log on to www.fromhomeeveryday.com
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Getting started, Tools of the trade
Tags: busines plan format, business exit strategies, Business Exit Strategy, examples of exit strategies, exit strategies for organizations, Getting started, home business plan, home business venture, money making products, Tools of the trade
Nice summary of some of the key considerations. Time & time again, from my perspective as an advisor to business owners who are ready to sell their business, i.e. execute their exit strategy, I see folks who wish they had thought about these issues sooner.
If they had planned and prepared, many times they would have better achieved a higher valuation on the better end of outcomes. On the other end of the spectrum these folks who have invested their heart and soul into their businesses would have avoided paying unnecessary taxes or worse case being left with liquidation as the only real option.
Case in point, Doug and Becky started a sandwich franchise years ago and were quite successful for a number of years before Doug got sick and was hospitalized for a time. To cover medical expenses and the lost sales from his recovery period, they took out loans against the business.
After unsuccessfully trying to sell the business on their own, they approached me. By this time their financial situation was dire.
There was little we could do, because the couple couldn’t sell it for how much they needed to cover the bank loans. Subsequently, the business went under.
While no one can foresee sudden illness, tying insurance and exit planning can help ensure that this contingency is covered.
Home based businesses are becoming really popular these days. This is the result of the internet’s growing importance. Earlier this was not the situation. Home based businesses…
I found your blog on google and read a few of your other posts. Keep up the good work.