Developing an Exit Strategy: Start the Race with the Finish Line in Sight – Part II

December 2000
by Linda Pinson & John P. Neal

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In Part I, we pointed out that runners would never start a race without knowing where the finish line is. The same holds true for a new business owner. When you’re starting a business, you should give thought to how you’ll want to finish it. Exit strategies include: (1)) selling all or a portion of the enterprise, (2) passing the business to a family member, (3) selling to an Employee Stock Ownership Plan (ESOP), (4) taking the company public, and (5) liquidation. These five options were fully explained in the last segment of this article. Once you have an exit strategy in mind, you’ll be better prepared to make some addition decisions. These are: (1) selecting the source, type, and amount of capital you will need for your business, (2) deciding on the current form of organization or legal structure (sole proprietorship, partnership, or corporation) that will best serve your needs, and (3) considering the tax issues that will impact your business.

Financing Your Business

Your choice of financing (source of capital) is important and will directly influence your choice of exit. When considering financing options, keep in mind not only the ease with which you can raise the funds you require to reach your goals, but also the costs of each type of financing in terms of both money and relationships. In the simplest sense, capital is available from four sources: (1) yourself, (2) friends and family, (3) financial institutions, and (4) the public at large. The monetary…IBPA Members – Click here to view the full article (login required).

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