The Importance Of A Business Exitstrategy
Posted October 14, 2008 
Comments(0) Business exit plans or business exit strategies are means of recovering investments. When a business is derived, the business strategy specifies or charts the way for a business to sustain itself and possibly develop, thus adding value to itself. An exit plan is usually included and defined in the home business plan which is part of the business strategy.
This is essential because at some point home business venture owners, entrepreneurs or venture capitalists would like to part ways with a company in order to recoup their investments.
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Some investors might decide to leave a company to follow up on other interests. Some may prefer to call it a day. And others might be forced to part with a company due to illness or some other tragic circumstances. In any case a sound exit strategy will help reduce the issues which might hinder a successful exit.
3 Common Types of Exit Plans
Succession
This choice is preferred by business owners who have kids and would like to hand over the business to them in time to come. However, there is no guarantee that the children would be interested in the business when the time comes. Business owners with this exit strategy should try to get their children interested in the business from an early age through involvement to increase the probability of them being interested in taking over the business in the future.
Liquidation
Business owners or sole proprietors usually decide to close their doors forever when:
For some reason, a company owner has to retire and all other options are found to be not feasible.
A business venture is too dependent on a certain skill the owner posses yielding it nonviable to handover the responsibility to a family member or buyer.
No one is interested in taking over or buying over the company.
Please keep in mind that before a business venture is legally allowed to shut its doors for good it should first meet all the legal requirements. Such preconditions would include paying off all outstanding liabilities and honoring all other obligations. Sometimes, after settling all outstanding amounts and liquidating all assets, the sole trader is not left with much.
Moreover, liquidation will erase the value of the company’s name, business associations and client lists which the business has built up over several years.
Acquisition
This could occur either through management or employee buyout or via a sale to another company. Before a sale can be made, the business must first seem to be a sound investment. Most businesses are bought up because they have a particular strategic benefits that would give the buyer a synergistic value when acquired.
A business venture will seem more attractive if:
- The business is seen to be continually making a profit
- The company has strong customer base due to its money making products
- All company assets are in good condition.
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