As a business owner thinking about how to exit your business, you really only have nine options to consider:
 
·         Sell or give your company to a family member;
·         Sell your business to one or more key employees;
·         Sell to your employees (ESOP);
·         Sell your business to other shareholders;
·         Sell to an outside third party;
·         Bring in an outside investor and keep a minority interest;
·         Go public;
·         Hire a management team to take over and become a passive owner; or
·         Liquidate your business.
 
And, there are really four steps to determine which exit option is best for you:
 
1.       Set personal goals.
 
Identify your most important objectives, both financially ("How much money do I need from the exit to ensure my family’s financial security?") and otherwise ("I want the company to stay in my family.").  Establishing well-defined and written objectives in advance of your exit gives you and your advisors the time to make your goals a reality.
 
2.       Goals must be consistent.
 
Determine whether your goals are consistent with one another. For example, you may want to receive all cash at closing when exiting your business in order to ensure your financial security. You may also want to transfer the business to a family member. Unfortunately, these may be mutually exclusive. Family members often do not have sufficient capital to structure a transaction this way. Stress and heartache can be avoided by addressing these kinds of issues early in the process.
 
3.       Understand value and salability issues.
 
Without exception, you need to understand the market value and salability of your company. For example, if the value of your company is below what you feel you need to support a comfortable lifestyle after your exit, you may decide to take some time to enhance the value of your business. Salability determines how quickly a business will sell and how much leverage you have when negotiating with a buyer. For example, the option of selling your business to an outside buyer may be eliminated because of a downturn in your business or industry. An investment banking firm can help you with this step. 
 
4.       Understand tax and legal implications.
 
You must consider factors such as the legal structure of your business entity, how its ownership is structured, exiting legal agreements and any changes that must be made. For example, if a transaction involves a sale of assets and the company is a "C" corporation, there would be significant adverse tax consequences. Good advice from your CPA and attorney can help minimize the taxes you would otherwise have to pay and increase the amount of money that you keep at the end of the day.
 
By The Exit Planning Institute © 2007