You may have been in business for only a short time, or maybe it has taken you several years to get the business in the black, and now someone is asking about an exit plan. If you've done the job, there's still another piece of business responsibility that needs your attention.
Whether it is an exit plan or a succession plan, there will come a day when you will no longer be the owner. It seems like good business practice to start thinking about the direction you'd like a transition to take.
An impending health or family issues may prompt an exit plan, or retirement may be in your future. In either case, will the assets of the business be sufficient to enable you to retire? A professional valuation may be in order to help you analyze the extent of the assets available from the business.
Consider these choices:
Hire a manager
Might you want to retain ownership of the business? Do you have a key employee you can promote to a position of general manager? Are you willing to delegate the responsibility and authority to allow the manager to run the business? What role if any might you want to play - perhaps a position similar to chairman of the board whereby you would limit your role to strategic and investment decisions?
Transition to family ownership
Has a family member been involved and working in the business? Do you sense the family member has the commitment to own and manage the business? Has that family member had any experience other than your business? If not, might you urge that person to gain some other experience to add maturity?
Transition to employee ownership
Are your employees trained and sufficiently experienced to take on the business? Will you leave the business or remain as an adviser? What may be the financial terms in arranging an employee buyout? Will you retain some investment in the business, and for how long?
Sell the business
Is the business in shape to attract a buyer? Do you know what your business is worth? Will you help finance a purchase? Will you be available to help the buyer during the transition to the new ownership? What about your employees; can you ensure their continued employment? How will your customers react? Consider potential buyers such as a competitor, perhaps a supplier or even a customer. A business broker should be in a position to provide an objective assessment and to assist in providing a positive presentation to maximize the selling price.
Close the business
Industry and market conditions might be such that it could be better to shut down rather than try to sell. Technology changes, liability issues, supplier issues, competitive issues, customer requirements or government regulations may make continuing unrealistic. An auction may be an option to recover the value of underlying assets and repurpose the site.
After considering the above alternatives, I suggest you review your business plan. Answering the above questions will likely uncover some areas that will need attention. Refresh your business plan and add a section addressing an exit strategy or succession plan. Start with a most likely scenario, don't forget a timeline, and run your revised business plan by your advisory team.