Ways to Exit Your Business

When it comes to selling or exiting your business, there are at least four general ways you can do that:

Option 1: You can wind it down, close the door, and walk away.
Option 2: You can pass it on to your heir(s), other family members, or close friends.
Option 3: You can sell it for cash or equity in a direct, private sale
Option 4: You can try to sell it with a business broker, but only 10%-20% of business listings sell successfully that way.

When it comes to selling or exiting your business, there are at least four general ways you can do that:

Option 1: You can wind it down, close the door, and walk away.
Option 2: You can pass it on to your heir(s), other family members, or close friends.
Option 3: You can sell it for cash or equity in a direct, private sale
Option 4: You can try to sell it with a business broker, but that is usually the least successful.

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Option 1: The only advantage here is that it may be the easiest.

It leaves you with no final disposition value of all the goodwill that you have built, and it leaves no legacy. You just tell your customers and vendors that you are retiring, and see if the landlord is willing to terminate the lease.

Option 2: This could be the next easiest option. Some work is involved, but you are not going through a sale process.

You are giving your business to someone you can trust, but there needs to be some training and transition time. You can will it to them, or gift it outright. By willing it, that may reduce the taxes they will have to pay, since ownership will only change at time of inheritance. In the meantime, they can earn part of the profits with a profit sharing agreement. A tax attorney can help here.

Option 3: Selling the business outright takes more work. But in the case of a private sale, the offer for sale is not publicly announced or listed with a broker.

You can prepare for the sale ahead of time, including at least the three financial statements. These need to be current, and possibly need the work of an accountant to be properly standardized. The buyer will ask to review all your agreements. If there is real estate the business owns, you have to decide whether you will convey it with the business or split it and have the business lease the real estate. In the second case, this is called a sale-lease-back. You can even sell the real estate separately from the business to a commercial real estate investor.

Option 4: Selling with a broker possibly more work than Option 3, depending on the broker. You really have to prepare for the sale ahead of time.

Most times the list price proposed is not realistic (i.e., too high), and Generally only 10% of the listings by brokers sell. The financials need to be properly standardized. You need to review all your agreements and see what is affected subject to a sale (e.g, loans, leases, customer contracts). Both you as a seller and the broker need to be realistic about the objective market value of your business.