Exit Strategy Tips

Many companies struggle when the time comes to implement an exit strategy –assuming an exit strategy is even in place. Ten tips on how to sell a business, plan an IPO, and choose a successor are below:

1. It is important to know when it is time to get out of the business. The owner of the online shoe store Zappos eventually sold the business to Amazon after continuous fights in the boar of directors occured. The owner of Zappos believed selling the business was better than the business continuing to run with an uncooperative board.
2. When implementing an exist strategy, keep employees’ needs in mind. Sometimes the best strategy is to have potential buyers and successors meet with decisions makers only until the deal goes through to help prevent negative gossip from developing among employees.
3. IPOs can be beneficial, but they also have potential problems. Management, founders, and initial investors often lose control over the company, and management of the business can become difficult.
4. Simply selling a business does not mean the selling individual has the intention of retiring. Many reasons exist for implementing an exit strategy other than retirement.
5. Creating a strong and capable management team is vital when a company will soon go public. The team should have financial and accounting experience and strong communication skills.
6. Develop a four part succession plan. (1) Determine which departments to focus on by ranking them by maturity, (2) decide how each department should develop in the future, (3) identify the business’ future leaders, and (4) create personalized development plan.
7. If selling the company is the end result, showing a history of steady growth can entice potential buyers. A consulting firm can help investigate potential buyers and their wants.
8. SecondMarket, a service company in New York City, can help a private business utilize assets that are typically illiquid. SecondMarket also recently released a website called Private Company Marketplace on which businesses can sell their privately held shares.
9. Individuals who hope to continue working until the end should create an estate plan to protect digital assets. Successors need information like server passwords, online merchant accounts, and domain names and registration in order to make the succession as smooth as possible.
10. Individuals should not always rely on performance reviews when considering future leaders; sometimes using your gut when choosing successors can help significanlty in the decision making process.  

See 10 Tips for Planning Your Exit, Inc., Jan. 23, 2010.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.