Whenever I teach an entrepreneurship class, I typically end up spending at least one day talking about exit strategies.
There is a good outline and video offered by PBS Small Business School that outlines the following options for exiting your business:
1. Walk away
2. Give it away
3. Sell to someone close to you
4. Sell to someone like you
5. Sell to the highest bidder
6. Sell to your employees
7. Sell through a direct public offering
8. Sell into the private equity capital market
I have always found the first option of “walk away” the hardest to believe, but yet it is also the most frequent option taken by entrepreneurs. My guess is that for many of these entrepreneurs, their business is their job and highly dependent upon them. So, if they leave, so does their business.
The rest of the options involve passing along the business to someone else, typically and hopefully for a fee/profit. However, the whole crux of these options is that your business needs to be able to be passed along. This is harder said than done.
I recently was assessing the real estate and property management business that my husband and I started. Even if we wanted to exit, we are not quite at a point where we are able to sell it. Why? For starters, we have been rapidly growing over the past few years. Thus, processes are continuously being revamped, including our accounting procedures. This makes it more difficult to look back at the historical financials and have it understandable. We also have a complex assortment of legal entities. We need to figure out the best and appropriate way to manage the transactions between the entities and also have some historical financials that make sense. If someone were to purchase the company, some of the job/roles are dependent upon us and not easily transferable. For example, my husband has a buying network that he has built over the years. Not anyone can simply buy the business and take his place.
We have been making progress though, with the end goal in mind of being able to sell the business someday or at least delegating the tasks with less involvement on our part. We have begun to outline and document procedures, even those my husband partakes in. This is perhaps the most important task because even if we do not sell the business, it allows us to delegate the tasks and not be at a total loss should an employee leave. We are transitioning to an industry standard software for managing our real estate, with the intent of being able to better analyze the business. We are hiring good quality people and writing up their job descriptions.
And while I feel sort of stuck right now in that we do not even have the option of exiting our business…in due time we will be there.