Starting a business in South Carolina is an exciting venture that can lead to great success and financial security. But for many, building and running a successful business doesn’t include thoughts about the end-game…when it’s time to walk away.
South Carolina business attorneys advise that comprehensive business plans account for how to leave your business when the time arrives. When reflecting on your business plan and essentials, do you have an exit strategy?
4 Business Exit Strategies
Here are four exit strategies you might want to consider:
1. Leave It to Family
If you have a family-owned business, an attractive option may be to leave the business to your family upon your retirement.
Not only will you be happy to see your legacy continue, but your family will continue to work in a stable and familiar environment. Additionally, customers and employees will feel confident that the business will proceed with little disruption.
2. Leave It to Your Employees
An increasingly popular option among business owners is transitioning ownership to company employees through a qualified retirement plan known as an ESOP.
Through an Employee Stock Ownership Plan, employees earn ownership interest in the company. This plan allows the owner to transition ownership while incentivizing workers through ownership interests.
This option works best for businesses that have a stabilized employee base. Likewise to leaving a business to family, customers and employees will have the confidence of minimal disruption to operations.
3. Management Buy-out
If you have a senior management team in place, an MBO may be another available avenue to explore. In this option, the executive management team would pool their resources and purchase all or part of the company.
Valuing the company and securing financing can take time, so planning ahead of your retirement years is essential. However, this option is another that presumes the long-term stability of the business under the existing leadership of senior management.
4. Outside Buyer
If you don’t feel confident that your family, employees, or management team would want to carry on as new owners of the business, seeking an outside buyer may be the right move.
When you consider selling to an outside buyer, you will need a valuation of your business, which, again, can be a lengthy process. It is best to plan for this option years in advance of retirement.
Your company’s customer base, profitability margins, assets, debts, and cash flow will be largely taken into account. You do not want to sell in a downturn if you wish to get top-dollar for your years of hard work.
With early planning, you will have a position of strength to sift through potential buyers and negotiate the structure and terms of the sale that best benefit you.
Working with a South Carolina Business Attorney
A well-crafted business plan that includes forethought of how to exit a business is essential to selling profitably and ensuring your legacy.
Knowing your business exit strategy will guide many other business decisions such as branding, marketing, management selections, employee responsibilities, and family involvement, to name a few. It will also guide financial decisions regarding leveraging assets and debts, business expansion, and tax mitigation.
An experienced South Carolina Business Attorney is best positioned to advise you regarding your specific business situation and options best suited for your exit strategy.
Contact our office today for a complete business review and consultation with a leading South Carolina business attorney.