Think The Exit Strategy is just for mid-senior executives? Think again. Entrepreneurs, regardless of age, live for the struggle and excitement of starting something new. And although many keep their focus on moving past their first few years in business, many neglect to think about an exit strategy – how to get their money back out again.
Traditionally, the Exit Strategy used to be something that was synonymous with the more senior executive, but with more and more younger entrepreneurs disrupting our marketplace and creating exciting new businesses, the traditional Exit Strategy has become a concern for all ages. And if it isn’t yours yet, now’s the time to think about it.
As a young entrepreneur, you’re probably living in the excitement of getting your startup off the ground. But just as much energy as you’re ploughing into the business today, is the amount you need to be ploughing into your future too. Whether you envision that you’ll be working in the same company that you’ve started today, way into your retirement, or whether you plan to build it up, and then sell it off for a payout – your intentions need to be clearly laid out and thought through, and incorporated into your business plan.
We covered some of the most common types of exit strategies in a recent blog here, but to help you get yourself up to speed quickly, here are the 3 most common types of business exit strategies to consider:
Passing the business to a successor
Whether your successor is a family member, or someone else in the business, the advantages of passing the business on is that it reduces third-party involvement, and gives you the possibility to maintain involvement and influence in business, even if you don’t want to be at the healm. But, as easy as it seems, this option could also bring a few challenges – especially if you don’t have a successor clearly identified and ready to continue on with the same passion and energy that you have invested into building the business to where it is today.
Transferring ownership through a management or employee buy-out
This option is great when either your management team, or employees, team together to purchase the business from you. Probably the preferred option if you don’t have a successor lined up and ready to take over, the Management or Employee Buy Out enables you to leave your business in good hands – allowing you to decide how much, or how little, you’re prepared to maintain. This type of option sees a reduced amount of due diligence needed, and rewards management with their long-term support of the business. It protects your business legacy and all the energy invested into to. For many, this option is a softer option than passing the business to a completely independent 3rd party – without knowing what their future long-term intentions are.
Selling the business to a 3rd party
Selling the business to someone else comes with a host of options too. Whether you choose to follow the IPO route where the sale of shares of the private company are done on a public stock exchange, or whether you choose the Private Equity route where the business or shares thereof are sold to private investors, or whether you merely merge or sell your business to another business, you have the opportunity to step away from the business successfully.
For many younger business entrepreneurs, the idea of retirement is too far away to even begin to think about. They are focussed on whether they’ll simply make it through Year 1 of their early-stage business. However, that’s where many make their crucial mistake. Critical business decisions are made guided by impulse rather than strategy – and in this world, it all starts by thinking about the long-term. So, before making your final decision on the path that best suits your long-term business goals, as well as your own personal retirement choices, you need to surround yourself with business support that is driven to help you succeed today, and plan for your success tomorrow.