HOW TO EXIT YOUR BUSINESS WHEN YOU DON'T HAVE A BUYER
Like most everyone else, business owners will eventually retire from their businesses. With retirement peeking its head around the corner, how do you plan to make an exit?
Selling is usually the preferred exit strategy for a business owner. However, there is not always a buyer willing to pay full market value. As a result, alternative exit strategies need to be explored and employed.
STRATEGIC ACQUISITION
Chances are that your business could prove valuable as a piece of someone's else's. It's never a bad idea to market your business to one attempting to make a strategic acquisition. If what you're selling matches up with a firm's internal needs, they may be inclined to purchase it from you to strengthen their base.
For instance, imagine you own a tomato farm and are looking to retire. While it may be challenging to sell your tomato farm at its full value to just anyone, you may find it easier to sell to a salsa or pizza sauce company as a way to internalize their supply chain. Sine they would no longer need to pay someone else to supply their tomatoes, these firms may view the purchase as a particularly strategic acquisition.
FIRE SALE ACQUISITION
Unable to sell at a full market value? Another option for exit would be a "fire sale" acquisition, through which you can sell your business to another below market value. While this may not be the most desirable option, it allows for a quicker sale and exit in a pinch.
SELL TO A SUCCESSOR
Maybe you feel more inclined to have your business run by a trusted successor. You worked to build this business, and you want to see it run properly in the future. Taking a family member or executive under your wing for training leading up to your retirement accomplishes just that.
This successor can be trained until their eventual purchase of the company, permitting a clean and total exit from the firm. They will then take over your role as both owner and chief executive.
DON'T SELL TO A SUCCESSOR
Alternatively, you can maintain your ownership while rewarding your successor for strong performance as the company lead. This approach affords the responsibilities of chief executive to another but keeps you on as owner of the business.
CREATE AN ESOP
Not comfortable with any one successor? You may want to consider drafting an Employee Stock Option Plan (ESOP) before your retirement.
With one or two years of planning, the savvy business owner can design the passing of responsibilities and ownership to multiple internal employees. This can enhance worker efficacy, resulting in greater performance as individuals and, ultimately, a collective firm.
SELLING YOUR ASSETS
The options above are undoubtedly the preferred course for most business owners. Still, with time constraints and a lack of available buyers, you may find yourself unable to carry out any of the above strategies. At this point, selling off your assets will be your only option.
Dissolving your business into assets is likely the least profitable and most disheartening option to a business owner. To avoid this, it is imperative that you start planning your exit strategies in the years leading up to retirement.
Want to talk with someone about your business's exit plan? Contact Erik Roemer, Gerber's CEPA certified Chief Compliance Officer, for more information.
