This article first appeared in the December 2020 edition of the Business Examiner. Read the online edition here.

Have you thought about your exit strategy for your business? Businesses are selling quickly these days, yet many operate without the end in mind, and fewer than 10% have a formal plan in writing. There’s also another important thing to consider, best illustrated by our business members and their unique situation… 

Over many years, these hardworking people have built a successful business. They’re now in their 50s with a combined net worth of $5 million, and almost all of it’s in the business (which is common). They want the freedom to retire by selling their business and living off the net earnings. 

They were considering selling in a few years, but with an ever-changing environment, they were unsure what their sector could look like then, and what that could mean for their business’s value in the future. 

The point here is that if you’re a business owner wanting to sell in order to tap into your business’s net worth—whether it’s to become financially independent, enter another venture, or pay down debt—you need to ensure you act at the right time and make the most of a favourable situation while it lasts. This means having a proper plan in place for when that time comes.

Here are some possible exit strategies that will also help you get your net worth out of your business: 

Sell as an earn-out: This would give you the opportunity to work in the business, essentially as an employee with a predictable income, while also enjoying possibly favorable tax scenarios. 

Sell the business to your children: Keeping your business in the family allows for more advantageous terms for the buyer (your children). It also gives you the ability to structure the terms of the sale in ways that can help both them and you.

Sell a stake in the business: You can sell either a minority or a majority stake in your business to an investor (individual or private equity firm as examples). There will be important negotiations involved here, so it’s best to connect with an expert early on. 

Whatever the solution, which can also be a combination of options, it’s advisable to start thoroughly planning for it now and enlisting the help of a financial team of experts. We can help to provide clarity, advice and forethought to your unique business situation and get you to your desired outcome.

Book an appointment with us today to get started on your exit strategy.