When you start a business, you don’t often think about the exit strategy. That usually comes after years of operating it when you are looking towards retirement. The questions we often hear are: what options exist? how much is it worth? and how quickly can I be done? 

Some of the answers will depend on how much you have already done to prepare your business for sale and what still needs to be done!

What Options Exist:

1. Sell to Key Employee(s)

Selling your business to one or more key employees can provide a smooth transition for clients and keep operations stable. Key employees already understand the inner workings of your business, making it easier for them to take over seamlessly. However, this option may not yield the highest market value, and you may feel a lingering sense of responsibility to support the business post-sale. Additionally, barriers like limited access to capital or specific licensing requirements may complicate the process. Working with a skilled advisor can help structure a sale that works for both parties.

2. Sell on the Open Market

Listing your business on the open market through a business broker can potentially bring a higher sale price and give you a clean break from the company. The transition period may be longer, as the new owner will need time to learn your systems and processes. Preparing detailed standard operating procedures (SOPs), either in written or video form, can help streamline the transition. Selling on the open market also opens up possibilities for mergers or acquisitions, which might be beneficial depending on your industry.

3. Close the Business

If selling isn’t an option or if you’re ready to completely wind down, you may choose to close the business. This involves liquidating assets to pay off any debts. After all debts are settled, any remaining funds can be distributed to the owners. To formally close a business, file a dissolution statement with the Ohio Department of Taxation, and if applicable, with the Ohio Secretary of State to officially dissolve the entity.

4. Gift the Business to Family

If you’d like to keep the business in the family, you have the option to gift ownership to specific family members. Before gifting, it’s essential to determine the business’s value, as this may have tax implications at the state and federal levels.

‍How Is the Business Worth? 

Valuing a business is a complex process, and working with a professional appraiser or broker is recommended to ensure accuracy. Here are three common valuation methods: 

1. Income Method: This method estimates the present value of future cash flows to determine the business’s worth based on its potential to generate revenue in the future.
2. Market Method: This approach compares your business to similar businesses in the industry that have recently been sold. The reliability of this method improves when there is a larger pool of comparable sales.
3. Asset-Based Method: This method calculates the value by subtracting liabilities from assets, giving a straightforward assessment based on the tangible value of the business.

‍How Quickly Can I Sell?

 The speed of a sale depends on sale price, industry, availability of buyers and capital, and so many more factors. Any business thinking about selling should start working on standard operating procedures, preparing financial statements, and starting to identify potential buyers. The more work the business owner does years and months prior to listing the business for sale, the shorter the “sale” period. 

Most buyers will want to do due diligence to make sure they know what they are buying; by having reports and SOPs in place, it will increase the confidence of the buyer.

‍Conclusion 

Planning to exit your business? Don’t leave it to chance. Schedule a free 15-minute consultation to discuss your options for a smooth, profitable transition. Click here to book online, or call us at (614) 440-1395 to get started. Let’s ensure you leave your business on the best terms possible!