September 2, 2013
What is your exit strategy?
"Build your business with an exit strategy in mind."
By: A. W. Morgan
Business owners get caught up in the process of starting and running a business, but overlook an important part of
the planning process – developing an exit strategy. What to do when there comes a point in time that the business
owner and the business must part ways.
This event could be voluntary, in the case of a sale of the business, or involuntary, in the case of the death of
the business owner. In either event, the business owner must have an exit plan.
So what is your exit strategy? How will you, as the business owner, transition out of this business in the future?
This decision making process must take into account the various reasons why an exit strategy for a business may be
necessary. Here are a few:
(a) Retirement: Not everyone
wants to continue working in their business until the day they kick the bucket. And, even if you do, there is
no guarantee that you will be physically or mentally able to continue operating eth business as you mature in
(b) Change in Interest: There may come a time when your heart is no longer in the business. You
may be looking for a change of life style, to relocate or to pursue other
(c) Death or
Illness: You may feel a commitment or obligation to your employees to keep the business going
if something happens to you. You may also need to plan for your family’s security, especially if you are the
primary or sole breadwinner.
(e) Succession Planning: You may desire to leave the business to a family member, as
part of your estate plan, or to your employees for their years of service.
Now that you
have an idea of the reasons why you may need an exit strategy, let’s consider your options. Here are the various
types of exit strategies that a business owner can employ:
(a) Sale of the
Business: The option that usually presents the greatest value to a business owner is the outright
sale of the business.
(b) Bringing on a Partner: For long term succession
planning you may consider bringing on a partner who could then buy you out when you are ready to leave the
Transfer: You may be considering passing on the business to your offspring. The transfer of the
business to a family member may have estate planning tax benefits and should be considered in your overall
(d) Selling to an employee stock ownership plan (ESOP): This approach can provide
many benefits, including, incentivizing employees by giving them an ownership stake in the business, provides
certain tax savings to the business owner and can be an excellent transfer mechanism for turning the business
over to a group of key employees.
(e) Liquidating the assets by way of an asset sale:While this is usually the simplest
option for winding up a business, it often yields the least return to the owners because there is no value
given for the “going concern” or goodwill of the business. This is usually the option used where the business
is dependent primarily (if not solely) on the efforts of the owner and cannot be transferred easily. However,
in this instance a plan could be developed to groom a successor who would be eligible to acquire the business
in the future.
Let us help you
with your exit strategy. We can discuss the various options with you and develop a long term plan that will enable
you to feel secure, knowing that you have thought ahead and have measures in place to address this
The Morgan Law Group is a full service corporate transactional law firm located in Gwinnett County Georgia near the
City of Lawrenceville. We provide legal transactional advisory and support services to individuals, business
owners, corporations, partnerships and government agencies, primarily in the areas of general corporate, business
law, contracts, business and asset sales and purchases, mergers and acquisitions, joint ventures, corporate finance
and real estate law.