“You’ll find plenty of advice on building a successful business, but people don’t talk so much about how to leave it behind. And yet there are many good reasons for wanting to exit a business. Maybe you’ve found a better opportunity elsewhere and want to start a new venture. Maybe you want to retire or scale back. Maybe your business has just run its course, and you don’t have the passion for it anymore. Maybe you need to raise cash quickly, and selling your business is the only way. Even if you don’t plan to leave any time soon, it’s worth thinking through your exit options and having a strategy in place. Each one has its own advantages and disadvantages.”
The past two weeks we looked at different exit strategies and ways we, as a business owner, can work on a successful handing over of our role to somebody else. Andrew Blackman wrote an accessible and interesting article on this subject, from which I quoted his four first suggested exit strategies, which were:

Pass the business on to the next generation.
Management or employee buy-out.
Trade Sale.
Liquidation.

Now, with a liquidation, you’re almost certainly not getting anywhere near the full value of your company. For one thing, you’re usually only selling the physical assets. Often a large part of a business’s value is in things like its reputation, its employees, its knowhow and its relationships with customers, and those things are hard to liquidate.
Also, even the physical assets are typically not sold at full value. We’ve all seen those “Closing Down” sales at local stores, where the merchandise is deeply discounted so that it sells quickly. Even if you don’t run a retail store, liquidating your company is the equivalent of running a “Closing Down” sale. Buyers know that you need to sell quickly, and you’ll struggle to get good prices. Because liquidation is likely to generate less value than other exit options, it’s important to present your liquidation plan to creditors and shareholders and get their approval before you act. Then it’s about conducting a detailed inventory of all your assets and deciding on the best way to sell them. Options include selling directly to a competitor or supplier, selling all your goods in bulk to a dealer, holding an auction, or holding a retail sale to customers. For more detail on how to liquidate successfully, read the useful step-by-step guide prepared by the Small Business Administration.
Other Options
These are the main options for a total exit from your business, but you do have other alternatives, particularly if you’re looking for a partial exit. Perhaps you don’t want to walk away from your business, but just want to take some money off the table and take more of a back seat in the running of the business.
In that case, some of the options we looked at in our recent Funding a Business series could be worth looking into. Some business owners, for example, invite private equity firms to invest in their business as a partial exit strategy. They sell a large portion of company stock to the PE firm, and hand over some of the managerial control. The idea is that the private equity investors make the firm more valuable during their five-to seven-year involvement, and then arrange a sale or IPO (Initial Public Offering), at which point the owners can either fully exit themselves or stay on as minority stakeholders.
IPOs, as well, can be used as partial or even full exit strategies. The original owners often stay in place after an IPO, but some take the opportunity to sell the bulk of their stock and pass on the management reins to someone else.
Next Steps
As you’ve seen, the route you take depends on what you want to achieve, and what’s important to you.
Passing a business on to a family member is a good idea if you have a willing and able successor, but can sometimes cause conflict, and needs to be carefully managed. Management or employee buyouts keep some continuity in the business and reward loyal employees but can be difficult to arrange if the company has a high valuation.
Trade sales often offer the best price for a company, but mean loss of control. And liquidation is a “last resort” option for exiting a business cleanly, but usually without realizing its true value.
The key, no matter which option you choose, is to plan early. If your life circumstances changed suddenly, what would you do? Make sure you have a strategy mapped out, so that you’re prepared to exit your business when the time comes.
That includes making provision for life after business ownership. A recent survey found that nearly 70% of entrepreneurs and self-employed people are not saving regularly for retirement. If you sell your business for millions, that won’t be a problem. But if the sale amount is smaller, or if you want to pass the business on to a family member for a token amount, then you’ll need to make other provision for yourself.
These and many other personal choices will affect the type of exit you choose, so it’s best to start planning and consulting your financial advisor as soon as possible. If you start early and do it right, exiting a business won’t be a headache, but a smooth transition to the next phase of your life.
“Andrew Blackman is a copy editor for Envato Tuts+ and writes for the Business section. He’s a former Wall Street Journal staff reporter, now travelling around Europe and working as a freelance writer and editor. He maintains a popular blog about writing and books.”

Ton Haverkort
ton.haverkort@gmail.com