Startup Proposals: Choosing Your Exit Strategy
Your startup proposal will probably be the most important document you ever put together. During this crucial development phase, it can be easy to become preoccupied with the beginnings of things and lose a sense of the end goal – but including an exit strategy in your initial proposal guarantees long-term financial security and peace of mind.
The buzz of taking your first step as a startup can make it difficult to keep an eye on your financial future – and that’s exactly why the exit strategy is so important. Working this into your initial proposal not only indicates that your startup is viable in the long-term, but also that you’ve prepared for every eventuality.
If you need help planning your business exit strategy, it’s simpler than you might think. It’s all about choosing the route that’s right for your business – and we’ve laid out your options right here.
Option 1: Selling
An understandably common exit strategy is simply to sell up, offering you a fresh start and a lump sum to use for future endeavors or retirement. There a variety of options here, such as selling to an investor, team member or other enterprise – and each offer their own unique advantages, depending on your ultimate aims. What’s essential to remember, however, is that your business should be a desirable purchase for any buyer – with or without you in it. Demonstrating to potential buyers that your company is self-sustaining and proven to be profitable will help you extract as much value as possible from the business – and can also be incredibly tax effective if you’re eligible for Entrepreneur’s Relief.
Option 2: Succession
One popular exit strategy is to name a successor for your business – for example, a family member. That way, you can keep your company’s value in the family, which is a massive factor for many business owners. A point worth considering, though, is the issue of mixing business with personal matters – especially as you’ll need to choose a successor who shares your professional acumen and passion for the business itself. But if your retirement income depends on your business continuing to be profitable, you’ll need a plan B in the event that this doesn’t pan out as planned.
Option 3: Closing
There’s a stigma attached to closing a business, which can deter many entrepreneurs from considering this exit strategy. In actual fact, opting to close can actually be a perfectly logical route – especially if your professional skill set and contacts have driven the success of your business, meaning it would be unsustainable without your involvement. The ins and outs of closing down become more complex depending on the size of your team and your company’s legal structure, which is why independent financial advisors can be an essential resource when planning your professional exit.
The key thing to remember is that no two businesses are the same and choosing an exit strategy is about making the right decision for your financial future. By considering the options available and making a choice that is both sensible and sustainable, you can ensure a gratifying end for your business and a comfortable retirement for yourself.