Plan Your Exit
An exit strategy involves developing a plan for passing on responsibility for running the company, transferring ownership and extracting your equity. Since a stable business is worth more than an unstable one, creating a seamless transition is essential to maximize your investment. This requires planning while the company is in good economic health – working closely with one of our business brokers.
A few common exit strategies RBA business brokers can assist you with:
Succession within the Family
Many owners of privately held businesses plan to pass the company on to family members or close relatives by:
- Giving interests to family members. By giving part of the business to family members who are actively involved in the business you can reward them for their hard work and loyalty. Then you can sell the remaining interest in the business and distribute money earned to the uninvolved family members.
- Selling the business to family members. This could be a good option if the family member succeeding you is not your immediate family or if only one family member is involved in the business. Selling the enterprise to that member will free up assets to be distributed more equitably throughout the family.
- This is also a good option if you need the proceeds of the sale for retirement. will keep the business in the family and may provide for a smoother transition.
Sometimes ownership succession within the family is not an option for a privately held business. Even when looking outside the family for ownership succession, it is still important to begin planning early to maximize the value of your business at the time of sale.
Allowing management the option to acquire your shares in the business is an excellent way to transfer ownership to a group that is dedicated to the business. This may be preferable to having an outside party assume ownership, especially if you are interested in having your business continue in the direction you had envisioned.
Management buyout may provide for a smooth transition and little or no learning curve for the new owners. Our business brokers can help facilitate financing options and structure the transaction.
Employee Stock Ownership Plan (ESOP)
Like a management buyout, an ESOP leaves the business in the hands of people who you know are committed to the company. Whether you are planning for a liquidity event, looking for a tax-favored loan, or supplementing an employee benefit program, an ESOP can offer you many advantages.
Valuation issues for an ESOP are unique – having a valuation done specifically for the ESOP is especially important before making a decision. Our business brokers work closely with many ESOP financing sources that specialize in these complicated transactions.
For more information and tools for developing an exit strategy, please visit the U.S. Small Business Administration website.