Posts Tagged ‘divestiture’

Business owners and entrepreneurs plan their business to make it the best. The decisions they take now can affect the running of the business in the times to come. But, what seems important out here is that simply wearing the robe of a successful business owner would not do anything good or great. Neither would it seem enough to build the business that has huge profits pouring in. All what you need out here is smart exit strategy.

Having a smart exit strategy helps in overcoming the potential threats to your business in any kind of unfavorable conditions. Speaking in the present sensitive business environment, exit strategies play an indispensable role for all kinds of businesses.

It is very true that more or less a business owner should have an effective business plan. It is similar in manner where you eat only when you feel the urge. And if you have the urge you’d also feel the taste of the food you eat. Now, at some point in time you intend to sell your business, and venture into a new one. It is here that you need to make a calculative move to clearly define your exit strategy that would work for you. Likewise, your business operations should always remain in conjunction with your business plans.

So, you have got the real track how exit strategies are important for you. It is the reality to see that the business you own or run today might not provide you with strong assets and cash tomorrow, or it may happen that over a period of time you get bored with the type of the business you are presently running. Anticipation is need of the hour to adapt your exit strategy. Rightly speaking, you have to think about your retirement plan, how to sell your business, and how to ensure business continuity.

Just think for a second… who’d run your business if you are absent from the scene. What value would your business hold, or plainly speaking; will it hold any value at all?

Exit Strategies for Your Business

There are traditional and contemporary exit strategies that can really prove helpful for your business motive.

Traditional Exit Strategies

• Transferring the business to next generation. This would save your business from moving on to outsiders.

• Every business owner should have a buy-sell agreement, which allows smooth selling of business to the partner or an executive in case of owner’s uncalled death. In case of sole proprietorship or where the business is run by one-man or one-woman corporation, the business passes on directly to family member or any other close relative.

• Selling the business in the event where business profits have moved down.

Contemporary Exit Strategies

These are alternative and viable contemporary exit strategies that provide more leverage and are conducive for the business owners’ interests:

• Developing a business which is specifically aimed for sale to another business entity such as a competitor.

• Hiring management above the in-house management, and which runs under the guidance of the business owner. This would allow many flexible exit strategies vis-à-vis selling the business to any third party, passing the business prospects to next generation or directly selling your business to the management.

• Mergers are also an optional exit strategy. Here two companies merge together in order to enhance the growth, development and diversification of the business.

Now that you have a fair idea about some available exit strategies, it is important that you be aware about the risks involved in implementing any exit strategy. The risks need to be carefully studied in the current market scenario. Remember that you should also be extremely wary about mistakes too.

Major Problems Associated with Exit Strategies

There are two elementary problems that are associated with the exit strategy. These include:

• It is not possible every time to have a smart and a working exit strategy that would work well with other goals, objectives, and operations of the business.

• Exit strategies go wrong if you have wrong people associated with you. These wrong people can be in the form of wrong management, wrong employees, wrong employers and wrong co-owners, and wrong buyers.

Therefore, while planning exit strategies, you should have a concrete and a professionally documented business plan in right order. When needed, the plan can be reviewed by the financial advisors, management consultants financial planning advisors etc. to get a fair idea about the working of the business processes.

How Can you Avoid Mistakes in Exit Strategies

Listed below are some of the don’ts that you need to be very careful of while going for any exit strategy.

• Don’t persuade any employee of your organization to own a part or full business, unless, you are not sure about his financial stability, and that he’s genuinely interested in buying your business. Ultimately it is you who have to bear the consequences if the co-owner fails to make the commitment, or breaks it for that matter.

• It would not be a good exit strategy to consider merging your business entity with another business, unless you are confident that the management of the other company is willing to enter into a firm commitment.

• There are tax consequences of selling your business to the acquirer. It is because a business sale is usually connected with huge amounts of money.

Wronged on Exit Strategies: The Mistakes Made by Management

Here are some of the management mistakes that can really affect the exit strategy. These mistakes include:

• Maintaining no records, books, and other principle material necessary for the review and evaluation purposes.

• Lack of any proper management structure that can prove helpful to the co owner who can even run the business even in your absence.

• You are considering exit strategies as the half hearted ways to sell off your business.

Remember! As the part of exit strategies, there are also plenty of both short- and long-term insurance and financial instruments available in the market. Theses include, Fee-Based Financial Planning, Securities Brokerage, Money Manager Referral Programs, Mutual Funds, REITs and many more. Look for the qualitative professional exit strategy solutions streamlined at Khanstellation Group, Inc. (KGI). Being a full service organization, you have intelligently designed exit strategies for your business, right here!

At KGI, we offer working plans which provide you with executive compensation planning, business continuation planning, and employee benefits.