Whether you’re looking to sell your business, transfer ownership of it, or plan for retirement, you’re going to need a way to get your money back out — an exit strategy. Unfortunately, most small business owners, caught up in the grind of overseeing day-to-day operations, don’t have one, which can lead to a myriad of headaches related to legal and accounting issues as well as an incorrect — or even a non-existent — valuation.

Even if you’re not planning on getting out anytime soon, you should have succession plan in place in the event of disability or death.

Read on for tips on the best ways to exit gracefully.

The Succession Plan

The U.S. Small Business Administration recommends visiting Score.org — a non-profit dedicated to helping small companies via mentorship — for more detailed information on succession planning. Here's the summarized version:

1. Choose a Successor

Experts recommend that you start this process 15 years prior to your planned retirement. If that time has already passed, don't waste any time. When you start to piece together who will take over and how, be sure to involve other people that can offer objective opinions as opposed to emotional ones.

2. Develop Training Plan for Successor

Make sure your training program is highly comprehensive. As time progresses, slowly move the successor away from training and toward the leadership role, slowly filling your shoes. Allow the successor to make mistakes on the job, which is the best way to learn.

3. Set a Date

Set a date for the successor to take over the leadership role. This is a good time for you to step back and limit your influence on any important decisions being made.

4. Prepare for Retirement

What do you plan on doing retirement? Do you want to vacation at the beach? Play golf? Start another small project? Whatever the case may be, you’re going to need to know what you can and cannot afford. If you’re not sure, consider hiring a financial advisor.

5. Install the Successor

Letting go is difficult. Just remember that if you followed the above steps, you gave the successor all the tools and training necessary for him or her to succeed.

Cashing Out

There are three ways to cash out of your small business.

1. A buyout. If you have partners, it makes sense to approach them first about a buyout before talking with interested outsiders. To negotiate your firm's price — its valuation — you'll need to convince acquirers it's worth a number you're comfortable with. Be sure to have an accountant and a lawyer in place to help with valuation, negotiation, and legal agreements.

2. Sale. You can sell the business outright. First you need to find a buyer, which might be a competitor or a firm in a related industry that can use your products or services for inorganic growth. Either way, you’re still going to need an accountant and a lawyer. In this case, it won’t just be for valuation, negotiation, and legal reasons, but to determine how the money will be divided assuming you have partners.

3. Initial Public Offering. Going public with an IPO offers prestige. However, it's expensive and difficult to do, and you can’t step down from a leadership role soon after the company goes public. If you did, investors would panic, which would likely lead to a tumbling stock price.

The Bottom Line

If you’re looking for an exit strategy from your small business, first make sure you have a succession plan. After that, determine the form of exit you want: buyout, sale or IPO. It’s highly recommended that you have a skilled team at your side, which would include an accountant, a lawyer, a financial advisor, and possibly a business evaluation expert.

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