Exit Strategy

An exit strategy is arguably just as important as everything that has gone before it in the life cycle of a business. If you’re close to retirement, have you thought carefully about what you want to do with your business? Will you leave your company to a family member, or sell it to your business partners? Can your company be merged? Will you close up shop entirely? Each of these options requires a different structure in order to increase the ultimate exit valuation.

What is an “exit strategy” exactly? While an exit strategy typically means the sale of your business, some entrepreneurs think of it as the way their business and they personally transition to the next major phase. An entrepreneur might not necessarily leave their business; they might just take themselves out of the company’s daily operations and have an executive team manage the company, while they stay involved in some type of advisory role. Or they might be headed for retirement, and want to leave a going concern with sustainable operations for employees and shareholders.

Metrics to look at when valuing your company for sale or transition include net cash flow, store traffic, sources and trends, products and inventory, customer base, revenues, infrastructure, and the owner factor (whether the company will continue to operate profitably without you). There are many benefits to an exit strategy, namely having the peace of mind that you can exit the business profitably, protect its value, and create a smooth transition for your management team or family. You might also create an income stream for yourself in retirement, and reduce or defer any tax impacts.

The most successful exit strategies are the ones that are created years in advance, even at the time of the creation of a company. But this step is often overlooked in the excitement and busy-ness of setting up a new company and working to make it successful and profitable. If you did not create an exit plan when you created your company, don’t despair. We have found that putting an exit plan into place about five years before the actual exit date is extremely effective.

An example of a successful exit strategy was our work with one of the heirs of the Quaker Oats empire. We managed his complex personal finances and helped him administer and strategize for the several companies he created, which included the Illinois Company, Douglas Securities, and North Star Inc. His goal was to transfer a successful and well-run business empire to his son upon his retirement. We helped him achieve this end, and he retired happily, knowing that his business was in good hands and that it had been transferred under the most advantageous conditions possible.

We are experts in the exit strategy. Contact us to help you determine your best exit options.