4 Exit Strategies for Entrepreneurs
Building your business is the fun and easy part of the process. Selling it is the difficult and fraught ‘end game’.
The Chinese proverb, ‘start with the end in mind‘ is never more aptly applied than when you are looking to dispose of your business and the end game is discussed at length with personal stories from leading entrepreneurs in my book, Drive Like a Real Entrepreneur, the process is split in to 8 constituent parts, being: Deciding to sell, Finding the buyer, The negotiation, Reasons deals fail, Pitching the price and the deal, Due diligence, Looking at the deal in its totality, What next?
So 4 exit strategies may be:
1. Trade sale
This is effectively selling to an organisation, in the same field or industry that may be seen as a market leader and takes your business in as a division, because of its customer, geographical or supply chain. The sale should be trouble free as the buyer knows your ‘game’. They will be experienced and keen to make savings in overheads to extract more gross profit. Be aware that that process must mean they will be keen to pay a suitable price.
2. Management buy out
Possibly the most seamless transition for your customers and suppliers because the same people will go forward running your organisation, it is just that it will be without you. Make sure that you can extract yourself from the organisation and that you become one of the least important people. Your key staff will love you for this, but they may be less able to carry this off, than you think. Be aware that they may not have the entire funds, need some financial help and that the commitment to buy is a heavy load for them to bear. What did you bring to the party, perhaps sales and market knowledge so ensure that this is in place.
3. Sell to a competitor
Selling to a direct competitor is interesting not because of the actual concept but being in a position to approach them to say, ‘we are up for sale’. This is probably fraught with difficulties because trust and a rigid confidentiality agreement is required. Again improving purchasing power and overheads will be the end game and will provide a suitable return for the buyer. Factor this in to your negotiations.
4. Sell to a complimentary business
Selling to a complimentary business is interesting in itself. It may be that you have a customer base that can take on board this new company’s products which may be complimentary, an example would be of course, tax and accounting and then leading to financial services. Perhaps even in building materials that need plumbing and or electrical supplies.
Whatever happens next, take care ensuring the trustworthiness of the buyer, their intentions post sale and that there is something left in the deal for them. It is not just about you.