Question

As an entrepreneur running a business that is experiencing stalled growth, you want to institute exit strategies. Critically discuss the possible business exit strategies that you know that can be used by your company if you decides to leave the business?

Answer 1

A corporate exit strategy is the strategic plan of an individual for selling its equity to creditors or other businesses in a product. A exit strategy helps a company owner to minimize or wind up his stake in a corporation and to make substantial income if the company is successful. If the business does not prosper the client may reduce risks through a exit strategy (or exit plan). An investor such as a risk capitalist may also use an exit strategy to prepare a cash out of a project. The exit strategy of industry should not be confused with the exit trading strategies in securities markets. Ideally, in her first business plan an entrepreneur creates a exit strategy before going into business. Choosing the exit plan will affect decision-making. Initial public offers (IPOs), corporate acquisitions and management buyouts (MBO) are common types of exit strategies. The method of exit that an individual chooses relies on several factors, such as how much influence or participation (if any) they want to retain and if they want the business to run in an equitable manner or if they are able to see it alter as long as a reasonable price is charged for their share of ownership.For example, a strategic transaction relieves the creator of his own liability, but also implies that power is surrendered. IPOs are often included in the holiest pillar of exit strategies, as they often carry the greatest recognition and reward. A bankruptcy is seen on the other hand as the least favorable path out of a company. The organizational assessment is a central element of a exit strategy and experts are able to help business owners (and buyers) analyze the accounts of businesses for a fair value. Transition administrators are also interested with helping vendors with company exit strategies.

Types of Exit Strategies:

Liqudation — and transfer all of the money exit strategy. For small enterprises, especially those that rely on an individual's performance, liquidation is often the only option, because there is nothing else to sell. You may want to spend time reorganizing the company to be run by another entity if you are in that role–make it a business that somebody might want to purchase.

Liqudation Over Time — Under this exit plan scenario, the investor retains any of more of the company's earnings over time rather than reinvesting them into an expansionary business (before ultimately selling or closing the company). Usually, this is achieved with large salary cuts or bonuses over a number of years before the company is finally concluded and is suitable for those investors who want to optimize their current lifestyle rather than expand their business aggressively.

Take care of your company in the family — Many small business owners have a vision of holding their family business safely to work for their heirs. The creation of a family estate plan can be extremely difficult and lead to family members fighting for property and/or business involvement. Family members may not be willing to take over the business (or their interest). New management or improvements in management of the company may not be accepted by customers.

You may want to sell the business to managers and/or staff — current employees and/or management may purchase the company. The business is able to prosper, when workers have a well-known and enthusiastic product. Organizing a long-term workplace investment will improve morale and inspire workers to work hard to make the business profitable. You may retain a share of the company and stay in a consultative role (or in another capacity). An employee shareholding plan (ESOP), an equity program for workers that allows them to become shareholders of a business, is one way of implementing this Exit Strategy.

Sell Business on the open market — This is the most common small business exit strategy choice. At any point, sometimes when the small business owner is able to withdraw, sells the company for a profit and eventually retains the sum of money she hoped to pay for it. The sales price may be far lower than expected and businesses can be challenging to measure them. You will spend time working on your company for sale to make it as attractive to potential customers as possible if that is your plan to leave.

Sale to a particular company — It can be very lucrative to put your small business as a competitive purchase. For all kinds of purposes companies acquire other businesses, such as the fast growth phase with a new acquisition, the discovery of synergies through similar market practices or merely the buying (and removal) of the competition. For the factors above, a profitable corporation can be highly motivated to purchase the business to make quick sales and maximum profit. If the only reason of the buyer is to reduce competition, after purchasing the company may be folded. Any existing staff will lose their jobs.

The IPO (Public Marketing Initial) — The IPO may be a feasible exit strategy but not for all small businesses. It can be really lucrative for the company's public. It's a long, costly road to become a public company. You may be allowed or will not be able to withdraw the funds based on how the IPO is arranged, because new owners will want all the money raised by the IPO to be used to expand the business. The enforcement and transparency requirements in public companies are significantly higher. As an individual, you can individually be responsible or liable for any errors or delays to disclose the information in advance.

Conclusion — The best strategy for exiting — The best strategy for exiting is the most appropriate for small businesses and specific goals. First determine what you want to do. When it is clearly money, the better option could be an escape route like selling on the stock market or to another company. If it is necessary for you to retain your reputation and see the small business you have created, family inheritance or sale to employees may be better for you. You will start working on whatever plan you choose from. Planning ahead allows you the right time to do so –and boost sales.