No business owner starts their company because they dream of one day leaving it. But, the reality of such a circumstance is always on the horizon and for some, it can be quite a daunting experience.
After all, as a CEO, you have poured your heart into this business and have probably sacrificed something to make it so successful whether it be your time, your money or, let’s face it, at times your sanity. It’s hard to let go when the time comes because of the pride you may have for your brand— so let’s make sure you feel 100% comfortable with the choices you eventually make, no matter your reason for being ready.
Understanding Your “Why” and “How”
Your first step in leaving your business should always be to understand exactly what is making you leave and what you hope to see for your company in the future. You might be leaving because you are ready to retire, you are realizing your business is growing to a caliber you think someone else could handle better, you feel you are headed down a road where your business valuation may change, you want to pursue something else, or because you simply don’t have the passion anymore. And be sure to think about whether you want to have any stake in the business after you leave, or if you’re ready to relinquish completely.
Choosing the Right Approach for You
How you leave the business is therefore crucial to the why you are leaving. Once you’ve established what you’d like for the business once you exit, you can take a look at the options available to you— and work with a trusted CFO or financial advisor to see which works best and how to implement it effectively.
- Mergers and Acquisitions
Mergers and acquisitions can be one of two things. You either agree to have a larger company buy-out your smaller company, OR you merge with a company similar to yours. Through a merger or acquisition, you essentially let your business find another company that has the resources to help sustain it— once complete, both companies can end up holding a larger market share and even bigger customer-base.
Either way, as a business owner who plans to leave, you can ensure that once a merger or acquisition is done, you feel comfortable with who will be leading the new company and the ultimate space the new brand takes up in the industry.
2. Transferring Management, Not Ownership
Say you want to leave the company but still have the desire to own it— the good news is that you have options. To ensure a smooth succession, you can transfer management to a family member, choose a worthy employer who you feel is ready, or bring in someone from outside that you think will do a great job. Remember, if choosing a family member, be sure they are truly qualified.
Whoever you choose, it’s best to have a transparent phaseout process prepared and to keep the company in the loop. The new manager should shadow and train under you, so that they can walk your footsteps easily.
It’s also pertinent to set up a Board of Directors that consists of qualified business leaders who are non-family members. Advise your successor to take the advice and direction from the board seriously.
3. Management Buy Outs and Buy Ins
Another option is to consider a management buy-out, where a manager can buy the business alongside an outside financier and/or private equity fund. What’s important to remember about management buy outs is that you as the current business owner will sell almost all your investment to the manager and the financiers who will serve as co-investors.
This is a great solution for a business owner who feels that the management wanting to take over can actually do so without a hitch— they are a team that the CEO trusts.
On the other hand, there are management buy ins where an outside team can hear a business owner is interested in selling and wants to purchase the business with the help of a financier or private equity fund. For a business owner that doesn’t have an internal team willing to run the business when he or she or they leave, it’s a winning scenario.
4. Liquidations
If you are in a position where you feel your business does not have a long-term future and you are officially ready to exit, this option might be the best for you. Work with a trusted CFO or financial advisor to close down your business smoothly and quickly, retaining as much assets as you can in the process.
Liquidations are truly a great way to alleviate stress from debts, legal actions, creditor pressure and lease payments. Sometimes shutting some doors can help you feel the fresh air of some new ones you’d like to pursue in the future.
5. A Final Sale
This option is the most commonly used by CEOs who no longer want anything to do with the business or for those who retire and want to relieve themselves of any business decisions or pains.
Selling completely means you rid yourself of the business and can negotiate the price you sell freely, given you ultimately have all the power. Depending on the reputation of your business, you can make a great deal of money by selling to the highest bidder. Be sure to work with a CFO to ensure you are selling in the market at the right time and through the right process— always taking into account the sales tax.
Done right, the profit you make from the sale can last you throughout retirement. Just be sure that whoever you’re selling it to is someone you trust and all pertinent terms are agreed upon before the sale.
We’ve Mentioned CFOs…
Throughout our approaches, we have mentioned that it’s always best to work with a CFO business advisor. This is a crucial part to exit strategies because as a CEO or business owner, you want to ensure that your assets, your business and your best interests are always priority. A CFO who works for you will help you along the way to optimize all opportunities that will leave you and your business best looked after. Here at Norris CFO, we put you first. We crunch the numbers, analyze the data and put all of our focus on your business needs so that you are left 100% satisfied. Call us today for a consultation and let us make exit planning a smooth transition.
For a complimentary, confidential discussion, contact Norris CFO: [email protected], 1 479 461 2321