Priyanka Sharma, Product Marketing Manager at Outright.com, contributed this article to BusinessNewsDaily's Expert Voices: Op-Ed & Insights.
Every day news of big Initial Public Offerings and acquisitions is reported in the press. However, that is only representative of a sliver of the successful exits American businesses experience. A career as an entrepreneur probably lends itself to having an exit strategy always back of mind. However, most businessmen and women do actively decide the legacy of their business at some point, and it is important to be mindful of the options and their pros and cons.
Bequeath it to family or friends
Many successful businesses live on after their founder through their children. If you leave your business to your family, the advantages are obvious in that you do not need to do much due diligence. You already know the future owners and their skills. The biggest con is that families often disagree over legacy bequests, which can make the business, and people close to you suffer.
Draw funds out over time
Often in lifestyle businesses, the owners draw out the profits as a big personal salary. While this might seem counterintuitive, if the purpose of the business is to sustain current levels, it is doable. The downside of this option is that there might be times when you need capital for your business but that money is already gone in your personal coffers. It would likely also be more difficult to convince investors and partners to join you with this strategy.
Sell to your customers
Sometimes your customers really love you. Like, really. Often when entrepreneurs are in the twilight years of their business and want to close shop, they forget a very vested party – customers who are avid fans. So before you put those shutters down, at least let your patrons know so in case someone sees the value of your business for others they can buy you out.
Acquisitions are a real possibility for any business, regardless of size. Despite the frequent reports of high-priced acquisitions by big companies like Google and Yahoo!, you don’t have to be a tech startup to be acquired. For an acquisition exit, the business owner needs to identify big players and potential competition within the industry to know if they’re able to present an untapped opportunity to a potential buyer. One of the biggest advantages of acquisitions is that you command your price based on perceived value. On the other hand, a potential threat during the acquisition process is the chance that it could go horribly wrong if the buying company doesn’t mesh well over long-term goals or management styles. When GoDaddy acquired Outright.com the transition was successful and smooth because both parties had the same goals and objectives for the future.
Saved the biggest for last. Initial Public Offerings (IPOs) are well documented throughout American history and media. The pros are, first of all, reaching the level of success to file an S1 alone deserves huge kudos. Second, you can create great wealth for yourself if you have a large number of interested investors. However, an IPO is a double-edged sword. IPOs are costly. Investment banks take millions of dollars just preparing for one. It’s a harrowing process. Once your business is public, your personal and company’s finances crest and trough on the whims of the market. This information becomes public knowledge, which can be a blessing or a curse. An IPO is truly not for most.
Having a business of your own leaves you many options in terms of an exit. Most of these options slowly emerge as winning or losing possibilities in the course of running a business. The last thing to focus on when embarking upon a business is how you will end it; but regardless, American entrepreneurs should feel confident that a comfortable retirement is within their reach just as much as in the salaried employees.
The views expressed are those of the author and do not necessarily reflect the views of the publisher.