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6 exit strategies for your business

What to do when the going gets impossibly tough
By Entrepreneur Staff |

If your business isn’t making money, it is wise to cut your losses and simply shut down the business. Even if your business is a sole proprietorship, you need an exit strategy—that is, your plan to get out of the business, just as you planned to get into it in the first place.

Selling, merging with another company, or otherwise closing your business needs some forethought, strategy and careful execution, according to Entrepreneur.com. In some ways, it’s a little more complicated than starting a business. Selling a business you’ve worked so hard to grow is rarely an easy decision.

Working out your exit strategy in advance, however, ensures that you will get your money out of the company—and perhaps have enough left over to start a new one. According to Susan Ward of About.com, small businesses have six exit strategies to choose from:

1. Liquidation
Here, you simply close up shop and sell all your business assets, but to make money with this exit strategy, you need to have valuable assets to sell, such as land or expensive equipment. “And profits from selling assets have to go to pay creditors first,” adds Ward.

2. Keeping your business in the family
This is the dream of many entrepreneurs—to hand over the business to their children or a successor they groomed while ensuring their legacy lives on, and maybe having a continued say in the enterprise. However, developing a family succession plan “can be enormously difficult because of the emotions and issues involved,” says Ward.

3. Selling the business to employees
Your current employees might be interested in buying you out and “taking over an established business they know a great deal about already,” says Ward. Or, she adds, your exit strategy “might be as simple as having one of your current employees take over the business.”

4. Putting the business up for sale
According to Ward, selling the business in the open market “is the most popular exit strategy for small businesses.” At a certain point in time, you can put up your asking price for the business and hope to get the right amount of money for it.

5. Selling to another business
“Businesses buy other businesses for all kinds of reasons, from using a new acquisition as a quick path to expansion through buying out (and getting rid of) the competition,” says Ward.

6. Having an IPO
Doing an Initial Public Offering (IPO) means taking your company public and could be “extremely profitable” for you, but Ward warns you may not be able to take your money out right away. The new shareholders may want to see the funds raised from the IPO used to expand the business, she says.

The best exit strategy, says Ward, is the one “that best fits your small business and your personal goals”—and you need to plan it in advance to help you do it right and maximize your returns.

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