5 Common Business Sales Exit Strategies

When it comes time to leave a business, you need to have an exit strategy. It basically outlines how you will leave the business and what happens next.  

All business owners should have an exit strategy they are working towards. Successful entrepreneurs know the importance of having an exit plan when they first start a business. When you know where your business is headed it increases your chances of receiving an optimum price for your business.

Open Marketplace 

This involves advertising your business for sale and selling to a stranger, client, friend etc. The business is advertised for sale and generally sold to the highest offer. This is the most common method of advertising and selling a business in New Zealand. You basically market your business 'for sale' and receive enquiries, and through negotiations you will come to an agreement with a buyer. A contract is drawn up and exchanged, money is transferred and the business sale is complete.

Selling to a Competitor

If your business has a good market share or is seen as a potential threat to a competitor, they could be willing to buy your business and merge it into theirs. This type of sale is usually known as a Merger and Acquisition (M&A). This can usually result in a win-win situation for both businesses. The seller can obtain a good price for their business and the other business can gain new clients, products etc at a fraction of the cost of developing themselves.

Place Under Management or Get a Partner

If your business has a constant and steady stream of income this could be a good option. This allows you to step back from the business whilst still retaining some ownership. You may pass the reins to another family member or have an employee buy-out over time.  This option has both advantages and short comings, it depends what your final goal for the business is.

See what the market will pay

The worst business exit strategy of all, but sadly most common, is for an owner to continue to run the business until they wake up one morning knowing they just can’t do it any more. They start desperately seeking an exit, getting a business broker in to see what the “Market Value“ is and taking what ever price they can get. The outcome is usually much less than they could have achieved if they had planned the exit strategy

Liquidate and Close

Unfortunately, not all businesses will sell. Especially, at the price the owner expects. There is the option to simply shut down the business and liquidate any stock and equipment.   There has been no plan, it has not traded profitably or a buyer cannot be found for the business. These are the least financially rewarding options but also has a high emotional impact on an owner who has put their life and soul into a business, often over many years to just see the doors close.

When it comes to selling your business. Having an exit plan is vital if you wish to achieve the best possible solution for your business.