The article from Entrepreneur lists numerous exit strategies for entrepreneurs, an aspect most business owners forget about while they are running a business. Whether you are planning to sell or not, you should always consider your available options throughout your time at the company.
Method 1: The Modified Nike Maneuver: Just Take It
One of the most popular exit strategies is the ”Modified Nike Maneuver,” which means to use the majority of income to pay yourself a generous salary and bonus instead of reinvesting money in growing your own business. Expanding the scale of operation of your own business would require taking money out of your pocket upfront, which could be problematic if your business requires reinvesting to grow. However, if you have other investors in your company, taking too much money out of the company for your personal use would also upset them as they are looking for rapid growth in their investment.
Method 2: Liquidation
The second exit strategy is liquidation. In this strategy, you quit your business and sell all of your assets. The proceeds from the sale would go first go to pay back creditors and the remainder would get divided among the shareholders. The main advantage of liquidation is that the process is fairly simple as there is no negotiation or transfer of control involved; however, your assets would only be sold less or equal to market value and the valuable relationships made in the business may go away upon liquidation.
Method 3: Selling to a Friendly Buyer
Business owners get emotionally attached to their business over time, so it is often easier to hand their business to someone they know who shares the same passion for the industry. This could create a win-win situation for everyone involved; however, selling to a friend or family member could also tear the company apart when they put emotion ahead of the needs of the business.
Method 4: The Acquisition
In an acquisition, you negotiate the price based on the perceived value of your business rather than the relative value to the industry. With the right acquirer, the value of your business could greatly exceed the reasonable value based on your income. If you want to choose acquisition as your exit strategy, it is important that you make yourself attractive to the buyer.
Method 5: The IPO
Initial Public Offering (IPO) is the process of offering shares of a public company to the public in a new stock issuance, allowing private companies to raise capital from the public instead of depending on current investors. Although the IPO could be tempting as it would drastically increase publicity and the stock’s worth, the amount of time and complexities involved with the IPO process makes it rare and a pain in the backside to deal with. Therefore, for most private business owners, it should only be considered as one of the many exit strategies when there are not other ways to get value out of your company without the complexities and efforts involved with an IPO.
For more information check out the Entrepreneur article listed below: