6 Exit Strategies From a Business
If you've built up a business over the years and spent time managing it, there may come a time when you are ready to leave the business and move on. Such a case calls for an exit strategy. An exit strategy is a method for leaving a business in a profitable way. Owners should consider some of the exit strategies available and pick the one that best suits their respective businesses.
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Initial Public Offering
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An initial public offering involves making the company a publicly traded corporation. This allows the firm to make it shares available to the public on a stock exchange. Owners of the business will receive shares in the company which they can, in turn, choose to sell or they can retain them to profit from the dividends.
Being Acquired
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Being acquired by a larger firm can often be a simple exit strategy for business owners. If the business is a smaller player that occupies an important strategic position in the market, then larger competitors may be interested in acquiring the firm. This can allow the owners to simply walk away from the business, although they may stay on in management roles.
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Selling to a Third Party
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If a firm is not in a good position to be acquired by another firm, it is still possible that an individual may be interested in purchasing the company outright. This is more common with small businesses but it can also be applied to a large organization.
Partner Buyout
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Often, partners will have different goals, some will want to get out of the business while others may be interested in continuing on. In a situation like this, a partner buyout is a good solution. In a partner buyout the partners who wish to continue running the business purchase the stake owned by the exiting partners.
Employee Buyout
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Another exit strategy in which the business is sold to internal parties is an employee buyout. In an employee buyout, the firm's employees are given the opportunity to buy the business and to continue operating it themselves. Another variation is the management buyout, in which the firm's manager's acquire the firm from the owners.
Liquidation
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Generally, liquidating a firm is a last resort. In a situation where the business is losing money and does not show a promise of recovery, the best exit strategy may be to sell off the components of the business. When a firm is liquidated its assets, including stock, equipment and even intellectual property, are sold off and the owners retain any profits.
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