Options for Exiting Your Business

Involuntary Exit Options

Involuntary exits can result from:

• Death
• Disability
• Divorce
• Other unplanned events. 

Your plan should anticipate such occurrences, however unlikely they may seem, and include steps to avoid or mitigate potential adverse effects. By following the advice outlined in this book, you’ll be in a better position to withstand the effects of a sudden event that forces you to exit your business without warning.

Inside Exit Options

Inside options include:

• Selling to your children or other family members
• Selling to your employees
• Selling to a co-owner

Inside exits require a professional who has experience dealing with family businesses, as they often involve emotional elements that must be navigated and addressed discreetly, gracefully, and without bias. These options greatly benefit from tax planning because if the money used to buy the company is generated from the business, it may be taxed twice. Inside exits also tend to realize a much lower value than outside exits. Due to these complexities, most business owners avoid inside exits and pursue an outside option instead. Fortunately, most M&A advisors specialize in outside exit options. If you’re considering selling your business and want to maximize your price, you generally shouldn’t pursue an inside exit if you want to maximize your proceeds.

Inside exits require a professional who has experience dealing with family businesses.

Outside Exit Options

Outside exit options include:

• Selling to another company or competitor
• Selling to a financial buyer, such as a private equity firm

Outside exits tend to realize the most value. This is also the area where M&A advisors and investment bankers specialize. The majority of this book is focused on outside exit options. Outside exit options will nearly always yield you the highest price. If maximizing the price is your goal, focus on outside exit options and hire an M&A advisor or investment banker to conduct a private auction to sell your company.