Six Ways to Leave Your Business


Selling your business is not the only way to leave your business.  There are other options of which you should be aware.  In the list that follows,  some other methods exist but are not feasible due to size, profitability etc.  After reviewing the list, you’ll see that some exit options are more desirable than others.

Before embarking on the sale of your business, you should understand these six exit options.

Sell your business: Possible buyers include co-owners, family members, friends, individual buyers, a single employee, a management buyout, an Employee Stock Ownership Plan (ESOP), larger corporations (strategic acquisitions), private equity groups (PEGS) or private investment groups (PIGS) (also known as financial buyers), customers, suppliers, and competitors. Basically, outside sale or inside sale.

Gift (Legacy) your business ownership: Possible recipients include family members, friends, employees, or charitable organizations.  The tax implications of gifting your business are very complex and may require a considerable amount of time to plan the transition of your business through gifting.  If this is your chosen method of exit, start planning many years in advance of your desired exit date.

Liquidate the assets: If your business cannot be sold as a going concern for more than the value of your hard assets, liquidating the sale-able assets through auction is one method of generating funds.  However, any sales proceeds must pay off the debts of the business before you can be paid.  This is one of the least desirable exit options and is the price many business owners pay for their failure to adequately plan their business exit.

Close up shop: If the business cannot be sold and does not have any assets of real value, and the business does not have other obligations in the form of debts, leases, etc., an owner can just close the business and walk away.  Or, if corporate obligations exist, those obligations can be transferred to the owner personally.

Bankruptcy: If the value of the business, whether as a going concern or its asset liquidation value, is significantly less than the company’s obligations, declaring bankruptcy might be an exit option.  Bankruptcy laws are complex and you should seek the advice of professional attorneys & CPA’s if you are considering this alternative.

Merger: This occurs when two companies combine their operations into a newly created third entity. This is different than a strategic acquisition whereby a larger business acquires a smaller firm and integrates the smaller company’s operation into the larger company’s operations.  A merger may not provide an immediate “cash-out”, but instead provides ownership in the newly created corporation.  Although possible, mergers of small businesses are unusual.

Other consideration: Hire a manager for the business and become an “absentee” owner: In this situation you would still own the business; this is really a partial exit option.  Obviously, unless you fund the business out of your own savings, the business needs to generate enough cash flow to allow you to hire a qualified manager, enabling you to step away from the business to the extent that you desire.

Although not included in this list, death or illness is an unplanned exit that occurs for far too many owners. About 50% of businesses are sold below their market value. This is a direct result of the four D’s: divorce, departure, disability or death.   Selling your business because of the four D’s often results in a sales price below market if there is no plan in place. Also, the owner has not developed a contingency plan to deal with that possibility, the distressed family will often have to settle for the less desirable options to dispose of the business, usually pennies on the dollar at an asset sale.


The Top 10 Ways to Increase Your Business’ Value

Everything you must do to prepare to sell your business is important, so it’s difficult to boil this article down to only 10 things.  But following are 10 things most owners have not accomplished and that are critical to having a sell-able business and increasing the value of your business.

1)   Start planning your business exit NOW.  The number one reason businesses don’t sell is owners don’t realize the need to plan for the sale of their business.  Before you can work on increasing the value of your business, you need to start the exit planning process so you understand all aspects and determine what’s necessary to even have a salable business.

2)   Get the realistic value of your business. Your business value can be determined by calling a business broker / consultant and asking for a Broker Opinion of Value (BOV) of your business.

3)   Develop a plan to begin overcoming the obstacles you face.  

4)   Replace tax minimization accounting policies with profitability maximization policies.

5)   Increase your gross margin to increase your profitability, and thus the value of the business.

6)   Increase your sales and marketing efforts.   Many businesses have significant opportunities for improvement in this area.

7)   Implement marketing automation.  The opportunities for significant revenue growth through marketing automation are very real and the cost is inexpensive when weighed against the benefits (which are amazing!).  Although there are numerous marketing automation service companies, consider reviewing the free resources (webinars, reports, videos and articles)

8)   Systematize, perfect and document your business operations.

9)   Steer away from a Flat organization and develop second-level management to minimize your importance to the success of the business.

flat organization refers to an organization structure with few or no levels of management between management and staff level employees. The flat organization supervises employees less while promoting their increased involvement in the decision-making process. This means that employees can bypass middle management and communicate directly with higher management or the Owners. Though this may be touted by giants like Google, for the small business intent on scaling building value and then perhaps selling or getting acquired, it is BAD!

10)  Write your buyer’s “general” business plan and 90 Day road map.

Im not a big fan of Business Plans but having something is better than nothing and it show good will towards a buyer if you invested that little time to help the succeed. At Max Business Profits, we use Road MAPs (Massive Action Plans) which can be corrected and revised on a dime if necessary, based on changing market conditions or internal planning.

CAUTION!  Although these ten suggestions will set you on a great path to successfully selling your business, do not ignore the rest of our blogs containing much more information, suggestions and details to help you successfully and profitably sell your business. These are just the obvious! Well, obvious to me, at least!