DO YOU HAVE A PLAN TO EXIT YOUR BUSINESS?

March 13, 2009

Business owners spend years pouring their blood, sweat and tears into their businesses focusing on their day-to-day struggle to satisfy customers and manage costs and employees. Most spend very little time thinking about the payoff — the cash they hope to receive when they decide to sell. Do you have an exit strategy?

Following are five different strategies in order of preference. The good news? You only need one.

1. Find an “insider” to buy: Family, friends and employees are often interested parties in purchasing your business. As long as the transaction is clean and fair, this is definitely a great solution.

2. Find an “outside” buyer: If friends, family or employees are not an option, bringing in an outside buyer is alway an excellent option. Of course, I am going to recommend my services for preparing your business for sale, marketing it to the appropriate set of buyers and complete the transaction to the mutual satisfaction of seller and buyer.

3. Bleed it dry: Slowly take the capital out of the business until there is none left. Excess profit can be taken for owner benefit. Inventory can be slowly reduced. Assets can be sold and replaced with leased equipment. It is important to understand as the business is bled dry, there will be no capital for growth and there may be negative personal tax implications.

4. Go public: Sounds great, but not likely. Very few companies actually are attractive enough to investors to “go public.” And, they require a ton of time, effort and money to launch. In the U.S., there are thousands of private companies, but less than 10,000 public companies. Why? It is just not as easy as it appears.

5. Close the doors: Shut the business down, sell the assets and customer lists to pay creditors, then divide the remainder among shareholders. Typically, if the business is profitable, this is not a wise option as you are throwing away a valuable asset — the cash flow generated by an operating business.

So, what is your planned exit stategy? Call or email me at 800-599-0503 or eric@bluechipbizsolutions.com and I can help you evaluate the pros and cons of each strategy.