Five Primary Exit Strategies
We’ve written blogs about exit strategies and the importance of having one in place. You can read those blogs here and here. A recent article at entrepreneur.com gives an excellent overview of the five primary exit strategies, plus the pros and cons of each. In summary:
The “Just Take It” Strategy: More appropriate for private companies than for public, this strategy involves the owner of the company drawing a huge salary, giant bonuses, and special shares worth more than regular shares. The owner then has enough socked away to not be dependent on the company after departure.
The Liquidation Strategy: A simple exit strategy, this is when the business shuts down operations, closes its doors, and sells off all of its assets. After a business valuation, of course.
The “Friendly Buyer” Strategy: This involves selling the business to someone who the owner knows will treat it with respect and dignity. The buyer can be a family member, an employee, or even a customer.
The Acquisition Strategy: Many family owned businesses employ this strategy to save the company from second-generation ruin. The owner finds a company that wants to buy the business and sells it to them.
The IPO Strategy: Something of a last resort strategy, this involves taking the company public and convincing investors to invest. IPOs are not only rare (of the millions of companies in the U.S., 7,000 are public) they’re exceedingly complicated. If the owner fails to convince investors, they’ve lost millions, and if they succeed, they’re forever under analysts’ scrutiny.
To read the full article at entrepreneur.com, click here. And as always, before putting in place any exit strategy, be sure to have a business valuation done.
By: Present Value
Additional Reading: