Small Business Exit Strategy Planning – Are you Prepared?

 In Business Tips, Small Business Financing

It’s something that most small business owners don’t think about until it’s time to implement it, but an exit strategy is an integral part of growing a business. Just as you would plan for your personal retirement, you need to plan ahead for that time when you either hand over the reins or decide to simply close up shop. 

Exit Strategy Options

There are a variety of ways to exit your business and move on to the next stage in your life. One of the most common options for a small business is to exit by handing it down to a family member. With this type of exit strategy, you need to choose someone who can handle the challenges of business ownership and groom them over time so they are prepared when you are ready to step down. Even if it was your intention to keep your business in the family, there isn’t always a family member who is up to the task. To ensure a successful exit strategy you may want to consider other options.

Selling your business is a great alternative to making it a family legacy and there are a number of ways to do this. You can offer it to a business partner, manager or a qualified employee. Often one of these people will be just as passionate about the business and its continued success as you are. They’re familiarity with daily operations and your customer base can make for a smoother transition. They may also want to continue working with you on a part-time consulting basis until they are confident in their own abilities.

If there isn’t anyone within your company interested in buying you out, a merger, an acquisition or an “acquihire” are also good options for an exit strategy. With a merger or acquisition, your business is typically either merged with or purchased by a company whose products or services align with yours. An “acquihire” is very similar to an acquisition but your business is purchased simply for the sake of acquiring its talented or skilled employees. While this can help provide consistency in their employment, it is important to negotiate for your employees’ needs when executing an “acquihire” or there may end up being a mass exodus leaving everyone unhappy.  

Some business owners opt to close their business, rather than hand it down or sell it. This decision may be intentional or due to a lack of interested parties, but can still be a viable exit strategy. Exiting your business takes planning to ensure it is in the best possible shape no matter which exit strategy you choose.  

Key Factors for Success

A solid exit strategy should include tactics that optimize your company’s value and be an integral part of business growth. Here are some of the key things to focus on to keep your business growing and your exit strategy on track.

Build recurring revenue –  Important to both business growth and fortifying your exit strategy, you want to figure out ways to increase your recurring revenue. It could be through subscriptions, loyalty programs or lease agreements – whatever creates repeat business for your specific industry. Potential buyers or family members poised to take over your business will want to know they have a certain amount of revenue they can count on every month.

Location, location, location – Just like in real estate, the location of your business matters. If it’s a physical location, it should offer easy access for your customers and provide ample and attractive space to conduct business comfortably and efficiently. For an online business, you should have an attractive, informative and user-friendly website that is current and fresh. The prospect of moving to a new location or a major website overhaul right out of the gate could make a potential buyer or family member hesitant to take over your business.

Measurable growth – In addition keeping pace with your industry, you should be implementing ways to outpace your competitors. This will have a significant impact on business growth and better position your company for a successful transition.

Diverse customer base – It just like that old saying “don’t put all your eggs in one basket”. If your customer base only includes one or two demographics, your business will be more vulnerable to fluctuations in revenue. The more varied your customer base is, the better shot you have at mitigating that risk and maintaining a more consistent income. 

Proven sales funnel – No one knows your customers better than you. Be certain to document any successful sales tactics or techniques that have consistently resulted in conversion. Passing them on to the next person to take charge of your business will allow them to feel more confident in their future success. 

Make it Happen with Small Business Funding 

Now, you’re probably thinking these sound a lot like things you need to do to grow your business – and you’d be right. Cultivating a successful business will make whichever type of exit strategy you choose equally successful. Along with hard work, dedication and sweat equity, keeping business growth on track can sometimes take a bit more working capital than a business has on hand. Securing small business funding to bridge that gap can keep your business moving forward toward the perfect exit strategy. 

If a lack of working capital is holding your business back, Capflow Funding Group may be able to help. We specialize in factoring for businesses in need of short-term working capital. We also partner with other lenders to provide funds for businesses that require financial services other than ours. Contact us today and find out how we can help you grow your business and achieve your long term goals.

 

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