According to our study, four out of 10 entrepreneurs in Canada are likely to abandon their businesses in the next five years, compared to one in three in the mid-2000s. The first step to a successful business succession planning process is to analyze the available options and decide which one best fits your needs. These are three common exit strategies for entrepreneurs who want to put their small business up for sale or pass it on. Select a good team of professionals to help you navigate the succession planning process and to communicate frequently and clearly with all interested parties.
Whether you're a budding entrepreneur with a startup or an experienced CEO, you should consider your business exit strategy. Moving on is never easy or simple, but it is a reality that more and more Canadian entrepreneurs are facing. Without planning an exit strategy that serves as the basis for business management, entrepreneurs risk limiting their future options. If a company is doing well, an exit strategy must maximize profits; and if it struggles, an exit strategy must minimize losses.
The most common exit strategies include acquisition by another company, sale of stock, or purchase by management or employees. This exit strategy is suitable for a small number of start-ups and large corporations, but it's not right for most small businesses, mainly because it means convincing both investors and Wall Street analysts that your company's shares will have value to the general public. This is one of the best options for owners who don't have a succession candidate or who want to preserve the corporate culture of the business. As with an owner who puts a house up for sale, an entrepreneur who plans to sell a business, which is usually his greatest asset, wants to obtain the highest possible return.
An exit strategy is often thought of as the way to close a business, and it can be, but in the best practice, it is a plan that moves the company towards long-term objectives and allows a smooth transition to a new phase, whether it involves reimagining business management or leadership, maintaining financial sustainability or adapting to challenges. The type of strategy you adopt will depend on the type of company you are and your financial and strategic objectives. An exit strategy is an important consideration for business owners, but it's often overlooked until significant changes are needed. Don't wait until you have trouble thinking about an exit, rather think of it as a succession plan or a successful transition.
A quarter of them see a family succession at stake, while just over one in five expect to close the business and sell their assets. More than half of these entrepreneurs intend to sell or transfer their business to someone outside their family. However, if you don't plan for the transition outside your company, it can result in a complicated succession process and a loss of value.