With apologies to musician Paul Simon, there are a lot of ways to leave your business:
Just slip out the back, Jack
Make a new plan, Stan
Just drop off the key, Lee
And get yourself free!
Inevitably, there comes a time for almost every business owner to call it quits. Whether it’s age, health, retirement, finances, or just wanting to do something new, many entrepreneurs eventually say goodbye to their beloved business.
Typically, these are the main routes people choose to get out of their business:
- Pass on the business to a family member
- Sell the business
- Transform the business into something new entirely
- Close the business and sell assets
While each situation will require different considerations, and only you know what those considerations might be, it is important to understand the pros and cons of each option:
1. Pass on the business to a family member: This is the desire of many entrepreneurs, and often the reason someone starts a business in the first place: to create something of value to give to, or share with, the kids.
The benefits of ending an entrepreneurial career this way are pretty clear:
- You share a valuable asset with your children
- Your business will be in the hands of somebody you trust
- You won’t have to say goodbye entirely to your creation
Are there downsides to this plan? You bet. The first and main one is that your children may not want to, or may not be ready to, own or run your business. Your dream may not be their dream. So, long before you decide that you are going to give or sell your business to your kids, you better be darned sure they want it.
2. Sell the business: This is a great option because it puts money in your pocket. There are essentially two ways to sell your business:
- An outright sale: You hire a business broker (typically), find interested buyers, and sell them the business;
- A gradual sale: Here, you might find a buyer who does not have the financial wherewithal to buy the business outright and, in that case, they make ongoing payments to you.
3. Transform the business: Maybe you're not ready to retire but are more than ready for a different adventure. The good news is that as an entrepreneur you have the potential to add new features to, and take away old ones from, your existing business. Indeed, that is one of the beauties of self-employment.
This will feel a lot like the early stages of a startup (which is likely what you want.) You will need to test the waters (again) to find out what works and what doesn’t, and you will go through the long route of experimentation/process of elimination. If this is your plan, this all probably sounds great to you.
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The risk here is that you will certainly lose some customers and clients in the process. So you need to be prepared for this loss and have a plan for how to re-brand, re-market, and ultimately recover.
4. Close the business and sell assets: For some, liquidation makes the most sense. By selling your assets, you can either pay off debts quickly or have a solid chunk of cash to put in the bank. Liquidation is also as quick as it is a straightforward, no-strings-attached activity. For more information, check out the SBA page on closing your business here, and liquidation here.
Whatever route you choose, leaving your business is a process.
Just slip out the back, Jack, and set yourself free!
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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