When you start a family business, you need to consider what will happen when you no longer can or want to run it. In other words, you should think about your exit strategy.
It might seem unnecessary to think about leaving a business you have just started (or have yet to start), but working this out in advance has numerous benefits, from the reassurance it affords you and your employees to the financial protection it can provide. Below are some options you might consider as your exit strategy.
Keeping the business in the family
If you want to keep a business in your family after leaving it, your exit strategy can be especially critical. This approach can make the transition of ownership exceptionally smooth, particularly if you have built in the time to groom and prepare your successor.
However, families fight. And your decisions for who will take your place could trigger disputes and conflict among family members. Thus, having protections and a strategy can be critical.
Selling the business
You might also choose to sell the business, which could be a good option if there are no family members who can or want to continue operating it. Selling a business could also be the most financially lucrative option if it is a profitable enterprise.
Keep in mind that there are different buyers who you might sell to, including employees, another business owner or buyers in the open market. The party you sell to can have a considerable impact on operations and the business’s future, so consider your options carefully.
Closing the doors
If you will not pass your business on and selling it is not a feasible option, you may decide to simply close the doors when you are ready to leave. With this option, you sell off your assets, pay creditors and walk away with the remaining funds.
This can be the most straightforward option for some business owners, but it can come at the expense of other strategies’ financial benefits.
The right exit strategy allows you to identify your business goals and take steps to reach those goals.