This is a guide to exiting your own business as sooner or later business owners think about a life after their current business.
The preparing of exiting your business generally is a lengthy process involving your legal and operational obligations. It will need to engage your accountant, lawyer and financial institution so you achieve the best possible outcome.
The exception to this is where someone has made an offer for your business that is too good to refuse.
In the business world there are several types of business owners. Which are you?
1. The entrepreneur who is extremely passionate about their business products and services and sees this organisation as a long term venture.
2. The second type is more interested in building wealth by starting a business or buying a run down business with the aim of building it up in the short to medium term and selling for a capital gain and doing this over and over again.
3. As per the first type and this business has huge growth potential and beyond the organisations ability to fund its success.
The selling of stock in an initial public offering (IPO) by converting a private to a public company raising shareholders equity to allow for expansion and for the owners to liquidate some of their capital. Examples of private companies that have grown and become public: Facebook, Starbucks, Amazon, eBay, Google and many more.
Here is our Guide to exiting your own business…
- Buy out – too good to refuse
- Selling the business as a going concern
- Merging the business with others
- Succession planning with transfer to family or staff
- Closing down the business
- Liquidation and bankruptcy
These are the Australian terminologies and may have a different name or terminology in other countries which are subject to that country’s legal and accounting legislation, rules and regulations.
1. Buy Out
Buy out that appears too good to refuse can have a time limit requiring a short term answer. Better you do not delay so evaluate with your accountant and close business associates for prompt reply before the offer goes cold.
Remember the saying – a bird in the hand is worth two in the bush.
The alternative to selling a business as a going concern may take a month, years or never.
2. Selling the business as a going concern.
The best time to sell your business is when sales and profits are increasing as that will be the time you receive a high sale price.
In most cases I would recommend using a reputable and professional business broker. Yes they do have fees but they also have people on their books looking for profitable quality businesses to buy.
The sale of a business is a time consuming and complicated process and a professional will smooth the selling process.
Be aware a business on the way backwards will be more difficult to sell with a lower potential sell price. In fact the business broker may not be interested in selling this type of business unless the buyer can see value
3. Merging the business with others.
The merging of two or more businesses must be to the benefit of all parties. With a merger there is not a great deal of difference to selling the business as a going concern as valuation and arrangement between the parties must be agreed to.
The merged business should provide a range of benefits such as:
- Increasing market share and strength
- Increasing competitive advantages
- Reduced costs through economics of scale
- Greater efficiency
- Allowing previously struggling businesses to continue and be profitable
4. Succession planning with transfer to family or staff
Many businesses are family owned and the next generation of family members may wish to take over or buy the business. This could also apply to loyal employees.
The most important fact is the business must be a viable and profitable business with an ongoing future.
The selling terms can greatly vary from commercial terms to little or no cost.
The succession plan will include:
- Transfer of power
- Transfer of assets
5. Closing down the business
This decision to close the business is usually because:
- The business is knot making enough money and therefore has little value
- You no longer wish to run the business
- No one wants the business
- Health or unforeseen events
- Business is no longer economical
6. Liquidation and Bankruptcy
Liquidation applies to companies or businesses.
It is where a liquidator is called in to take control of the company. Generally an organisation administrates the company to see its viable and if not liquidates the assets and distributes the funds to the creditors. There are statutory laws under which the liquidators must operate.
Bankruptcy applies to individuals, sole traders and partnerships.
It is generally where a person is unable to pay their bills when they become due.
If you are having these difficulties it is best you talk with your accountant and lawyer and they can guide you.
Should you be in an irretrievable position there are specialists in the field who operate and act under the Australian Commonwealth Bankruptcy Act.
Fact sheet developed by CPA Australia (world wide accounting body) click the link – CPA Australia exiting-your-business
Business Exit here
Start Your Own Business is a 10 part series
- Part 1 – 9 Best Reasons to Start Your Own Business – Link
- Part 2 – Start Your Own Business What Field – Link
- Part 3 – Conduct a Reality Check on You – Link
- Part 4 – Franchise Consideration Pros and Cons – Link
- Part 5 – Reasons You Need a Business Plan – Link
- Part 6 – Free Help to Start Your Own Business – Link
- Part 7 – Choosing the Right Business Structure – Link
- Part 8 – Developing and Writing a Business Plan – Link
- Part 9 – Starting Your Business – Link
- Part 10 – Running and Monitoring you Business – Link
Summarising the Guide to Exiting Your Own Business | Part 10
This is the last blog in the series. Hopefully these articles will help you get started on a sound footing with ideas how to control your business and finally when it’s time to move on. Should you want some further advise contact us here
The preparing of exiting your business generally is a lengthy process involving your legal and operational obligations. It will need to involve your accountant, lawyer and financial institution so you achieve the best possible outcome.
The above is a guide to exiting your own business as sooner or later business owners think about a life after their current business.