Ready to Exit?
Tired of talking about the PPP, forgiveness, small businesses closing, Zoom, masks, and anything else related to Covid-19? Yeah, so are we.
So, today let’s talk about exit strategy.
Let’s say you woke up at 2am from a dream and thought “wow, I’ve spent xxx years growing this business, I need to pass the torch”, or something similar to “man, I need a break. Can I somehow relinquish some control and take a vacation?” How do you actually do that?
There are many options out there- not all involve sleazy private equity firms or investment bankers who want to make a quick commission and take apart your business. So let’s… sell.
Wait, do you even HAVE to sell your baby to a stranger? ----NO! (actually).
Here are the five keyways you can get back to sleep after waking up in a cold sweat with nightmares about giving away your business:
- Going public. Yeah, that’s right, you can make an IPO (Initial Public Offering) no matter how big/small you are, if you have the right valuation, management team, business plan, and a few other key items. Why not take your quilting shop public??? Beware of the regulations, and make sure you have a really good finance and operations team for this.
- Sale to an ESOP. An Employee Stock Ownership Plan (ESOP) is an awesome way to let your employees have complete and total buy-in to the success of the company.
- Sale to a strategic buyer. Huh? With less jargon- this means you can sell to a competitor or someone in the supply chain.. A competitor or similar business may find your location, equipment, employees, process, or product attractive, and buy your operations to grown their brand. Additionally this could be a manufacturer who wishes to control the supply chain if you produce a raw material for the industry.
- Sale to a financial buyer. Yeah this is kinda the ugly one- it’s selling to private equity or an investment house/bank. Many times they couldn’t care less about anything but making a profit on the flip sale of your business. This puts in jeopardy all of your hard work, your employees, their families, and your initial investment. Sometimes it’s the best option, though, if you just want to get out.
- Sale to an insider, such as family or key employee. This one is the “feel good” story. It means “I’m selling my business to my son”, or “Bob, my CFO, has worked his tail off and he knows the business”. There are many tax shelters in place for this, allowing for notes and deferred repayment during transfer of ownership. Be sure to have a good team of advisors, and watch your initial investment continue to grow.
These five things will help you escape. It’s not easy being a business owner, as it all comes down on your shoulders to make decisions, key decisions, that keep everyone in your enterprise safe. Your exit is a huge decision that will impact everyone involved with your business.
If you or you know a business owner who is looking to transition out of their business, we can help. We work to find the right exit plan and can help with any of these five methods.
The SharpCFO Team