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3 Ways to Create a Successful Exit Strategy for Your Business

3 Ways to Create a Successful Exit Strategy for Your Business

8 Feb 2022

Every business owner needs an exit strategy.  Even if you have no intention of selling your business or retiring in the near future, it is in your financial interest to develop an exit strategy.  An exit strategy will also benefit your family and your hardworking employees.  Business exit strategies are essential plans for what will occur when business owners decide to relinquish ownership.  The best business financial plan includes exit strategies that facilitate a smooth and seamless transition. 

Merge or Sell 

Sell your company to another business or merge with a separate enterprise to join forces and you just might depart the business with quite the lucrative golden parachute.  As long as the company that purchases or merges with your business shares similar goals along with a similar ethos, the acquisition will likely prove mutually beneficial to both groups.  However, it is a mistake to take the first offer that comes your way.  

desk with analytical paperwork

When in doubt, consult with a Canton, Ohio financial advisor for guidance in regard to what the potential sale or merger of your business means to your bottom line.  Choose the exit strategy of selling or merging and your attention will shift to negotiations.  This approach contrasts with that of selling shares of the company to the public in the form of an initial public offering, referred to as an IPO.  

If you were to take the business public, it would be valued in the context of its industry and niche.  Every Ohio business owner should be aware that the process of selling or merging a business will prove time-consuming.  There is the potential for an agreement to be reached and subsequently, fall apart when the attorneys start dissecting it or after due diligence is performed.  Even slight irregularities in accounting can upend a business sale or merger acquisition.  

 

Working on an exit strategy for your business? Want a second opinion? Contact McGervey Wealth Management!

 

If the sale goes through, you’ll enjoy a clean break from the business that helps you transition to your golden years with a sizable financial nest egg.  Our investment advisors are here to help you manage your hard-earned retirement money through our full-cycle investing process.  This unique approach to building and maintaining wealth for the future considers economic factors both domestically and globally as well as market dynamics including the potential impact of inflation, deflation, reflation, and stagflation.

It is also possible to sell your business’s talent to another company.  Plenty of business owners and managers in Ohio and beyond are on the prowl for talented, skilled, and experienced personnel as opposed to the business itself.  Choose this exit strategy and you’ll cash out of your business while also helping your employees transition to new roles without interruption.

The Exit Strategy of Liquidation

Liquidate your business and you will sell the assets.  Alternatively, you can redistribute the business’s assets to shareholders.  If your business owes money to creditors, the liquidation exit strategy provides assets to those creditors.  You can sell assets ranging from real estate to equipment, inventory, and beyond.  

The quickest way to liquidate a business in Ohio is to close it and sell the assets right away.  Though immediately selling assets won’t fetch top dollar, it will help you satisfy debts to creditors and segue to the next chapter of your career or retirement.  The downside to using liquidation as a business exit strategy is you will no longer obtain value out of the business relationships you spent time and effort forging with others in and around where you did business.  

Our financial advisors are here to help you liquidate your business with an overarching strategy.  Lean on our financial planning specialists for guidance in liquidating your business and we’ll ensure you adhere to the optimal procedures for selling assets, valuing customers and earnings, following protocols especially in the context of employees, satisfying outstanding financial obligations, and honoring the rest of your commitments.  

If you have time on your side, you can gradually liquidate your business.  The liquidation of a small business over time provides an opportunity to maximize the value of assets.  This approach also empowers you to continue paying yourself until the business runs out of money.  

You are legally empowered to gradually remove funds from the business rather than slowly reinvest them into your enterprise.  The gradual liquidation of your business ensures you can maintain a decent quality of life and also provides your hardworking employees with the opportunity to transition to new employment opportunities. 

The drawback to gradual business liquidation is it stunts the company’s progress and also reduces its value on the open market.  Even if you decide to sell the inventory and equipment as opposed to the business itself, this approach has the potential to anger your business partners.  Every small business owner should be aware that the gradual liquidation of an enterprise has tax ramifications.  

Exit the Business by Passing It on to a Family Member

You can keep your business humming along and retain ownership within your family by giving it to your spouse, son, daughter, sibling, or another relative.  The advantage of keeping your business in the family is that it makes all of your hard work that much more worthwhile.  Start planning to exit your business by passing it on to a loved one and you can gradually groom that successor as time progresses.  Carefully select a family member who is capable of owning and managing your business and you’ll rest easy knowing this exit strategy proves mutually beneficial for you as well as the family member who takes over the business upon your departure. 

At McGervey Wealth Management, we get to know you and your business on a personal level and keep things simple, using common language everyone can understand. We are fee-only fiduciaries, meaning our financial advisors are honest, objective, and work to advance your financial interest as opposed to our own when helping you expand your nest egg through full-cycle investing. To learn more about our full-cycle portfolio management techniques and how they can help your business contact us today.

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More About the Author: Michael McGervey

Michael serves as a resource to executives and business owners, assisting them in making proactive and informed personal financial decisions. He is also a member of McGervey Wealth Management’s Investment Committee and is responsible for investment research as well as the execution of the firm’s portfolio strategies.