If you've got a successful business then why would you want to think about an exit strategy? There are as many reasons to sell or "Exit" a business as there are business owners.
Some business owners just want to retire and enjoy the fruit of their labor. Some have health issues and they want to slow down and heal. Some business owners have heirs that are just not interested in continuing the business. Some Investors just invested for a term of years and now they want their principal investment back. Some business owners have been offered an amazing amount of money to buy their business and they just want to take advantage of the offer.
Whatever the reason to sell, it's always wise to create a Tax Management Plan before you sign on the dotted line... the after tax net profit in your pocket can be quite substantial.
So here are the most common exit strategies and considerations these days for planning purposes:
Merger & Acquisition (M&A). Merging with a similar company, or being bought by a larger company that may see an opportunity can be significant.. This is a win-win situation when bordering companies have complementary skills, and can save resources by combining. For bigger companies, it’s a more efficient and quicker way to grow their revenue than creating new products organically.
Initial Public Offering (IPO). You set a price per share you're going to sell your Company for and if there are more buyers than sellers, this can potentially be a quick way to significant wealth.
Sell your company on a cash basis or with a contractual payment agreement that may provide significant upfront cash and/or payments so you can not only pay off investors, but pocket and invest for your future.
If you have a stable business with a steady revenue stream, you'll want to make sure you can sell the company without your daily intervention. The business will only be transferrable if you have employees that can run your company after you exit.
Liquidation and close. Even lifetime business owners can choose to retire or get sick. If a business isn't able to continue without the owner working then they may choose to just close the business doors, and liquidate assets in an auction. This happens more times than we want to realize when business owners have not prepared for their exit or retirement and have predeceased the closing of their business without employees that can continue the enterprise after the owners demise or exit due to illness.
As you can read, it's wise to plan an exit strategy and to prepare for your exit by making sure your business can continue without you.
If you would like to discuss, please call David De La Rosa at 831-427-3040 or Email: David.DeLaRosa@LPL.com to discuss or set a complimentary appointment