o matter how much blood, sweat and tears go into developing a company, sometimes a business becomes stagnant and profits slow down. When this happens, it’s time to re-evaluate your company’s worth and decide if an exit strategy is the right move. An investor, venture capitalist, business owner or trader can initiate an exit strategy, and it is often elected once a company no longer generates enough profit on its own and is considered to be a poor investment or dwindling business.
In order to surmount the losses and avoid future damage, selling a business and creating a contingency plan for an exit strategy might be the wisest choice for protecting yourself legally and financially and for opening the door to greater, more profitable opportunities.
Mentally, it’s best to think about a loss as a chance for something rich in potential, as when one door closes, another can surely open. Planning an exit strategy is not always indicative of a bad situation, as it can sometimes justify a mere change in career choice or location. With a positive and affirmative mindset, valuable guidance from financial advisors, and the required resources to create an effective exit strategy, you can complete a sale feeling confident in your decision.
Consider The Market & Your Business’ Future
Discuss the market with your financial advisors and consider your company’s appeal and value before targeting your desired buyer. For instance, your business might appeal to investors interested in learning more about your entire business model, its goals, audience and growth prospects, or you might find your business more desirable for strategic buyers who could be concerned with only selected components of your business.
Once you have selected a buyer based on the market, it’s important to consider where you’d like to stand regarding your business’ future development. If you’d like to be a part of the company long-term, an IPO or management buyout might be preferable over an acquisition, for instance.
Opt For Mergers & Acquisitions
If you notice that your company is no longer making substantial profits and has lost its direction towards steady growth, it might be smart to consider an exit strategy in the form of an M&A in order to re-ignite the fervor and revenue.
By opting for an M&A, you’ll either be joining forces with a similar company regarding goals and values or seeking a larger company for acquisition of your business. This strategy can help generate growth and profit, and by keeping “synergy” alive within the two businesses, you’ll be able to work together as partners to mutually benefit for years to come.
Choose Your Buyer Wisely
When selling your business, it’s important to make sure that it is in good hands, especially if you choose to retain ownership or hold a different position within the company. If you pass it along to a “friendly buyer,” then you can have faith in your company’s future expression of its core values.
Additionally, you can opt for a management buyout, where you pass the company onto the next generation of managers. Such change in ownership is often smooth and efficient, and it provides immediate liquidity to owners and shareholders. It also allows you to remain a part of your company’s growth.
Liquidize Your Assets
Proceeds from the assets must go towards repaying creditors, and the balance will then be split between shareholders. While a liquidation of assets exit strategy is quick and efficient, without negotiations and transitions to different authority figures, it can weaken relationships with loyal patrons and partnerships of the business, and you might not get as much money for yourself and shareholders as you could have if you had sold the business to receive a payment above market value through proper negotiations.
Create An IPO
When opting for an IPO exit strategy</>, you are selling part of your company to the public markets. These sales tend to be flashy and newsworthy, as it is rare for most companies to apply for this type of strategy. Private companies need to prepare for this type of exit strategy early on in their business careers, and without an independent board and audit set in place, an IPO cannot go though. Thus, IPOs are applicable to larger businesses, as opposed to most small-to-mid sized companies.