Creating a Financial Exit Strategy for Your Small Business
Planning an exit strategy for your business may not seem like an obvious step at the start of your business. After all, you are looking to grow your business, not end it, right?
However, planning how you would like to pull your money, time, and energy out of your business is critical. No matter the reason or circumstances for your decision, proper planning will prove vital when you decide to move on.
It is never too early, or too late, to be prepared and to create a solid financial exit strategy for your business.
What Is A Financial Exit Strategy?
An exit strategy details how you plan to leave a business once predetermined criteria are met. A good exit strategy takes into account all stakeholders, finances, and operations.
Accordingly, possible exit strategies for small businesses may include; family succession, employee or management buyout, and selling the business, to name a few.
Why You Need An Exit Strategy
A well-formed business strategy will minimize losses for a struggling business and maximize profits for a thriving one!
Failure to plan a strategy on the proper way to leave your business can lead to a loss in value or a complicated succession.
A financial exit strategy will make the transition easier and as profitable as possible, for all parties involved.
Weigh Your Options: To Sell or Close
1. Selling to a current employee, family member, or trusted associate
In a seller financing agreement, the buyer can pay off the seller over time. This phased exit strategy allows the seller to maintain an income while the buyer runs the business without hefty upfront investment.
However, your relationship with the buyer can cause you to undervalue your business or even suffer when business disagreements arise.
2. Closing the business
Closing your business may mean having to liquidate your business assets (such as equipment, property, tools) to pay off creditors, investors, and employees.
Before liquidating your business, work with a liquidation expert to ensure you follow the proper protocol and finalize all legal and financial obligations, properly.
Here is how we suggest approaching business finances for the best possible outcomes:
- Separate your personal assets and debts from those of your business.
This ensures personal financial security in case your business is unable to pay off its debt! - Set revenue targets and monitor your finances, sales and cash flow positions.
This helps you gain valuable information and figure out when you need to roll out your exit strategy. - Have well-organized personal and business financial records to give you an upper hand when negotiating an offer for your business.
*We are manifesting that million dollar offer for you* - Know your day-to-day costs and ensure your business does not spend more than it should to survive.
This forces you to stick to your profitable exit strategy and avoid bankruptcy.
As we previously said, having a proper exit strategy for your business allows you to see the bigger picture at hand. It’s not about preparing to fail; it’s ensuring you’re not failing to prepare!
Indigo Bookkeeping Services helps clients do exactly that. We handle your business finances by keeping books and financial records accurate and up-to-date. This allows you to make the right decisions for your business, every day.
Our bookkeeping services make your business simple. Contact us today!