Many business owners see their business as their retirement plan—banking on its sale to fund their retirement. A common mistake made by owners hoping to make a substantial sale is a failure to plan effectively. Without a proper plan in place, an owner could potentially fail to get the value they’re seeking in the sale.
Separating the business from the business owner is crucial in terms of ensuring a favorable sale on the part of the owner. If both are one in the same, then the business is not worth as much without the owner’s insight, experience, and hard work present.
An exit strategy provides the owner with a way to reduce or eliminate their stake in the business. If the business is successful, an owner stands to make a substantial profit. In the event a business is not successful, an exit strategy enables an owner to limit losses.
Ideally, an owner should develop an exit strategy as early as possible—even before going into business—as the choice of exit plan can influence business development choices.
The sooner an exit strategy is created, the easier the entire process will go. Business owners have a few options:
Whether you are selling your business, transferring ownership, seeking retirement, or facing a “forced-exit” such as bankruptcy or liquidation—planning your exit is a big undertaking that has implications on employees, your business structure, its assets, and your tax obligation.
Before you embark on your exit strategy, be sure to engage your lawyer and even a business evaluation expert.
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