Alternative Exit Options: What’s Right for You?

Alternative Exit Options: What’s Right for You?

When you picture your business without you, what do you see? Perhaps you have visions of handing the company down to a skilled son or daughter; maybe you’ve heard great things about ESOPs or are interested in the idea of selling to a current manager.                 

As I write about in depth in the fifth chapter of my book Walk Away Wealthy: The Entrepreneur’s Exit-Planning Playbook, selling truly is the best option for most entrepreneurs.

Here’s the short version of why selling to an external person or company is normally your best bet:

1. You’ll receive the highest sales price. There’s no way a family member or employee’s bid can compete with a strategic buyer’s. If you’re looking to monetize the value of the business you’ve been building over years or decades, an external transfer is by far your best option.
2. There is greater reliability with an outside buyer. You won’t have to worry about the buyer’s resources and won’t be pressured to pursue seller-financing arrangements like you might in other exit options.
3. It will minimize the risk of having to reenter the working world to save your business. This happens all too often when an inexperienced or uninspired family member takes the reins.

That being said, it can make sense to consider an alternative exit option in certain situations. Read through the scenarios below to see if any of these options are right for you and your company:

You Have an Emotional Attachment to Your Company

• If building a family legacy is just as important to you as making the most money off of your company’s sale, it makes sense to pass along your hard work and success to a family member.

You Have a Deep Connection With Your Employees

• Many entrepreneurs are still working with the same core group they hired at the beginning of their business. You’ve shared the ups and downs with these people and it’s understandable if you want to continue providing for them. If you’re worried that longtime employees will resent a new, outside leader and there’s interest, an ESOP (employee stock ownership plan) is a great option for you.

You Want More Control Over the Future of Your Company

• If you want to stay very involved with your company after its sale, it makes sense to transfer ownership to a family member or employee. This situation will also allow you the benefit of choosing your own buyer—a luxury that doesn’t usually accompany an external sale.

You Have No Other Choice

• Unfortunately, the hard truth of the matter is that many companies simply don’t sell—especially those without a solid exit plan in place. If selling to an external buyer isn’t an option for you, consider an ESOP, family sale, manager sale, or putting off the sale altogether.

If you decide you’d like to pursue an alternative exit option, I review the best ways to go about it in chapter six of Walk Away Wealthy.