So you decided to start a business… now what? Before you get caught up in the daily grind of growing your business, take a step back and think about what you will do with your business AFTER you spend all those thousands of hours building it. Or, if tragedy strikes, ask yourself, what will happen to your business then?
You have no idea?
Don’t worry, you’re not alone. Most virtual business or small business owners don’t plan that far, they’re just trying to get through the day. So I thought I’d give you some ideas on the best way to transfer or sell a virtual business when the time comes, so you’ll have a clearer idea of where you’re going before you even start.
However, remember that the key to building a business ready to be sold at any moment is to withdraw from day-to-day operations. This is why it is imperative to build a process-driven company, rather than an owner-driven company. If you do not ultimately make this transition, your business will be worth less and you will most likely receive less for your business.
Here is an overview of the best 7 virtual businesses (or small business) exit strategies:
- Employees: Some methods to sell a virtual business to your employees are the ESOP (Employee Stock Ownership Plan)a MBO (Management purchases) and MBI (Management purchases)
- charitable trusts: This is a great strategy for those virtual business owners who want to benefit from charitable donations. Some methods are CRT (Charitable Remembrance Trust) and CLT (charitable cargo trust)
- Family: This is when you want to transfer your virtual business to your children or a family member. Some methods are giving away shares, GRAT (grantor retained annuity trust)flp (family limited partnerships)SCIN (notes with self-cancelling installments)IDGT (intentionally defective grantor trusts) and private annuities.
- co-owners: When buying from a partner, the co-owner transfer channel is a good method. Includes purchase/sale agreements, preemptive rights, and other transfer techniques.
- Retire and sell to a stranger: When you retire, many of the methods mentioned above can be used. Such as charitable trusts, private annuities, or grantor retained annuity trusts.
- Continue in business but sell to a stranger: This strategy is usually implemented when an owner needs growth funds but does not want to invest personal assets. It can be sold to a private or public entity.
- make it public: This is the securities offering process (common or preferred shares) from a private company for sale to the general public.
