When you're starting a business, planning an exit strategy deserves the same consideration as researching potential funding sources and identifying your target market. It's so important that it's often recommended you include your exit strategy in your initial business plan, because investors commit to any significant financial contribution, they'll want to know what kind of return they'll receive and how they can exit the project, and what your long-term plans for the business are.

As you plan your exit strategy, you should take all possible options into consider so you can find the best fit for your business. Options for exiting the business include:

1. Selling the company
2. Merging with another company
3. Passing the company down to a family member
4. Franchising as an exit strategy
   

Action Steps
The best contacts and resources to help you get it done

Create your exit plan early -- and include it in your business plan

To create an exit plan that offers the greatest benefit for you, your employees and any investors, start early. Your chosen exit strategy may influence other key aspects of your business, even if you're just launching it.

I recommend: Use BizPlanIt's exit strategy section to begin drafting your plan for exit. Find business plans you can use as a model for your exit strategy, such as those featured at MoreBusiness.com. Or, use the Seven Step Exit Planning Process from the Business Enterprise Institute.

Hire an expert to help you with your exit strategy plan

To ensure a seamless transition, hire a consultant to help you create and implement your exit strategy. They can guide you through the process, simplify it, and alert you to any issues you need to consider.

I recommend: Find firms that specialize in exit planning, such as Changing the Focus or Roundhouse Advisors.

Outline family succession as part of your exit strategy plan

Many business owners enlist a trusted family member to take over the business when they retire, but while this may seem like the simplest solution, it has its own challenges. For example, you may offend other relatives who aren't given control, or employees may resent a family member stepping in and taking over. To minimize the risk of family squabbles or a difficult transition, determine your succession plans at the outset, and make sure everyone in the company--especially your designated successor--understands what this means for them.

I recommend: Family Business Experts provides tips, succession management and succession software. The Family Business Institute offers resources, consulting and advice on succession planning.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  One of the most popular strategies for exiting the business is going public, but it's also one of the most difficult to accomplish. While the option may sound exciting, it may be more practical to hand over control to a trusted employee or relative, or merge with another company.

Although many business owners never think about an exit strategy, the smart ones are planning it right from the beginning. In fact, experts say that an exit strategy should be part of your initial business plan. Investors often insist on seeing an exit strategy in a business plan to ensure that they'll be compensated for their investment in case you leave the company. To maximize your company's value down the line, you need to decide how and when you want to leave it. Exit strategies generally include one of the following choices:

1. Sell your business and retire.
2. Sell your business and retain some involvement.
3. Pass it on to another generation in your family.
4. Take your business public and sell your shares (very rare for small businesses).
5. Dissolve the business.

Action Steps
The best contacts and resources to help you get it done

Decide: Stay or go?

Consider your personal goals when deciding what to do with your business. If you love working in your business so much that you can't imagine not being involved in it, go for options that allow you to sell the business but retain some involvement and decision-making abilities. On the other hand, if you're hoping to work really hard in order to fund your retirement, opt for solutions that don't require you to stay on after a sale.

I recommend: For seminars and tips on how to create an exit plan that fits with your personal and business goals, visit ExitPlanning.com from the Business Enterprise Institute. Discuss exit options with your peers on the Small Business Community Forums.

Include your exit strategy in your business plan

When writing your business plan, include a section on your exit strategy. In fact, it may be wise to write your exit strategy first because that will dictate many of your other decisions. For instance, once you know what your end goal is, it will influence your choices regarding legal structure, partnership contracts, property agreements and more.

I recommend: BizPlanIt offers free business plan resources, including the basics on exit strategies, mistakes to avoid and a newsletter about exit strategies.

Place a value on your business

Things you need to consider include business assets, historical earnings and even future earnings.

I recommend: Find valuation methods from the National Federation of Independent Business (NFIB) or try the business valuation calculator from CDNBX.com.

Increase business value

Just the way you would spruce up your house to sell it, you need to tidy up your business to increase its value to buyers. Reduce excess stock, overhead and debt. Get your finances in order and prepare sales forecasts. Lock up key employees with incentives to remain after the sale.

I recommend: Entrepreneur.com provides an overview of exit planning, including preparations you need to take in order to sell your business.

Enlist help

When it comes time to sell, consider enlisting the help of a consultant or business broker. They can help you through the tricky process of transferring ownership.

I recommend: The Principal Financial Group and Abraxas Business Services offer consulting services to help you through the exit process. List your business for sale at BizBuySell.com.

Have a family plan

If you have a family-owned business, one of the hardest decisions you'll have to make is choosing a successor. Creating a succession plan and communicating that plan with all family members involved in the business will help ensure a smooth transition.

I recommend: SuccessFactors.com offers success management software and succession planning Webinars.

Close your business

Shutting the doors to your business and liquidating assets doesn't mean your venture is a failure. There are many instances where dissolving the business is the most practical solution. For instance, closing may be the best option if your business is dependent on your expertise, if no family members want to take over or if the economic situation is unfavorable.

I recommend: The IRS provides procedures for closing a business, including forms you need to file.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you're passing your business on to a family member, consider a gradual transition to retirement and groom your successor adequately.
• •  Set realistic goals. Very few small businesses ever achieve IPO status, so don't count on that.
• •  Plan for the unexpected, too. Have a plan in place in case you die or become disabled.

An exit strategy is beneficial for businesses to implement in order to allow entrepreneurs a plan for getting out of the business when and if needed. Owners may want to get out of their business for any number of reasons; they may be looking to retire, they may have run out of money or they may not have the same passion they once did for their business. Regardless of why a person decides to draw up an exit strategy, there are rules and regulations for these business owners to follow.

By planning an exit strategy, business owners can help ensure that they will make the most of their business, even after they decide to depart from it. There are a number of laws and regulations for exit strategy operations, but the Internet offers a number of resources to assist in understanding these rules. Business owners may opt to:

1. Access informative and educational websites in order to learn about laws and regulations for exit strategy options.

2. Review legal websites and blogs for information regarding regulation exit strategy operations.

3. Consult state and federal websites to learn about laws and regulations for exit strategy options.

Action Steps
The best contacts and resources to help you get it done

Review presentations and educational websites for information about an exit strategy

Education websites can offer business owners information about how to best plan an exit strategy and how to do so in a valid and legal manner. This information can be presented in a number of advantageous formats, including presentations and simple text write-ups.

I recommend: RetirementPlanBlog.com offers a download of the presentation they took part in that was sponsored by the Financial Institution Committee of the Chicago Bar Association. The presentation offers exit strategies for business owners, specifically baby boomers, within the legal confines of the law. Options and regulations regarding business exit strategies include selling the business, mergers, buyouts and more as illustrated by StartUpNation.com. The Small Business Association also offers information as to how one can accomplish planning a successful exit strategy.

Read blogs to learn about laws and regulations for exit strategy options from experts

Blogs can offer firsthand information from individuals regarding any number of topics. Many lawyers and law firms have blogs, which can serve to benefit business owners, especially when they divulge information regarding the laws and regulations for exit strategy plans.

I recommend: Legal assistance is provided in the blog of EONetwork.com. This advice comes from a woman who not only co-owns a business, but is also a full-time lawyer who understands the importance of implementing an exit strategy that adheres to the laws and regulations for exit strategy options. SociusLaw.com discusses how their legal office helps clients create legally applicable exit strategies.

Review government websites for information regarding laws and regulations for exit strategy options

Sometimes, the best and most straight-forward information comes from the source. In the case of exit strategy planning, many business owners can benefit from learning about laws and regulations for exit strategy plans by reviewing government websites.

I recommend: Kansas.gov offers their advice regarding business exit strategy plans that adhere to their state and federal laws and regulations. Questions answered cover topics such as what steps to take in planning your exit and what types of exit strategies are available for businesses. MissouriBusiness.net offers information and educational links regarding business exit strategies rules and regulations, especially when it comes to the legalities of declaring bankruptcy.

One of the key sections of any business plan is deciding on an exit strategy. The investors need to be assured that the money they put into the business is safe and their monetary investment will continue uninterrupted in the event you leave the company. When planning an exit strategy, the most important considerations are maintaining continuity and profitability.

Many different exit strategies exist, but the main choices are ownership transfers to third parties or to insiders (children, key employees or co-owners). Advantages and disadvantages exist for either of these option, so consider all the implications of this major decision to be sure your final choice is the best one for everyone involved.

Action Steps
The best contacts and resources to help you get it done

Transfer ownership to family members

Many entrepreneurs want their business to stay in the family. They may spend time training their children or other relatives to take over when they retire. This strategy not only keeps the business under the family name, it also provides inheritance tax benefits.

I recommend: Smart Business Network explains how to successfully transfer your business ownership to family members.

Franchising

When you franchise your business, you sell your business concept to other entrpreneurs to replicate. You not only net money from the sale, but you also keep the business running as it always has. Franchising can also result in large scale growth for your company, but it involves more work and legalities.

I recommend: Entrepreneur Media provides information on the business considerations of franchising. The Federal Trade Commission has a list of articles on the legal aspects of franchising.

Buy-out

A buy-out occurs when one or several stockholders buy your share of the company. This exit strategy provides cash and keeps the majority of the company's stockholders in place. A buy-out is an excellent exit strategy if the other stockholders are in agreement and have the capital to close the sale.

I recommend: Spirit West Management considers the pros and cons of buy-outs as an exit strategy.

Merger

In a merger, your company combines with an existing company. This exit strategy may give you some cash and stock. In some cases, current management remains the same. When joining forces, however, the original partners in your company may end up with less control.

I recommend: Learnmergers.com details the various types of mergers that are possible.

Acquisition

An acquisition occurs when your business is bought by another company. Although this exit strategy provides you with cash or stock, it often means management changes for those in the original company, because the new owners generally appoint their own officers and managers. In addition, the company itself may lose its corporate identity as it becomes a subsidiary of the purchasing company. Many times the company also undergoes a name change.

I recommend: Knowledge @ Wharton lists some of the major challenges of acquisitions. Altman Weil also offers a case study of an acquisition.

IPO (Initial Public Offering)

An initial public offering allows the company's shares to be traded on the stock exchange. Depending on the amount of shares offered, the major shareholders usually maintain control of the company. An IPO has the potential for a large return if the company has experienced tremendous growth in recent years, but it is the least-used exit strategy.

I recommend: Inc.com has an article about exiting through an initial public offering.