The decision to exit your small business is a tough one. Whether you choose to sell, transfer to family or friends, or wind the business down, it’s not usually as simple as closing the doors. There are legal, tax, financial and even emotional considerations you should be aware and plan for well before you walk away.
We’ve written extensively about the importance of a business plan. This valuable tool will guide you through your start-up phase and evolve with you as your business grows. It can also serve as your guide on how to exit your small business.
How to Exit Your Small Business
There are four common ways to exit a business. Careful consideration should be given to each, as well as the implications of each one.
- Transferring the business to another individual
- Selling the business
- Closing the business
- Declaring bankruptcy
For starters, refer to our Exiting Your Business – Your Legal Requirements article to discover the legalities of each option. If you are unsure which option is best for your business and unique circumstances, it’s highly recommended you Talk to a Lawyer before landing on a decision.
Detail the Specifics
Each part of your exit strategy needs to be considered in advance and they should form part of your business plan.
Succession Plan
When it comes to succession planning, you will need to rely on several stakeholders; both inside and outside the business. Each of these individuals will play a critical role in helping to make the transition a smooth one. Refer to The 9 Key Players of Succession Planning article for further details.
Operations Plan
No matter what type of exit strategy you are planning, your company must have a detailed operations plan that contains contingencies for legal and contractual obligations, as well as employee terminations. Unsure of where to start? Speak to our Operations and Systems Expert.
Human Resources Plan
If your small business has employees, their rights need to be taken into account if you decide to sell or dissolve your business. If the business is staying open, employees are usually entitled to maintain their seniority, benefits and contract. If an employee loses their job as a result of the handover, they must be given the appropriate amount of notice. If you need any clarification on your legal obligations to employees, talk to our HR expert.
Market Research Plan
If you’re putting your small business up for sale, it’s vital to understand how much it’s worth on the market. Market research can help you achieve this aim, providing the figures you need to make an informed decision. Start with our Market Research Resources Guide, which recommends the key databases, organizations and associations that can help you research your market. For businesses based in Vancouver, Bizmap offers clear and relatable market data at the neighbourhood level. Small Business BC also offers a variety of market research services through our data expert, Mark Eversfield.
Marketing Plan
How do you plan on marketing your business to potential buyers? Depending on your timeline, you might not be able to get full value for your assets and inventory. Preparing a marketing plan for your business in advance gives you a head start when it comes time to sell. For starters, avoid the tendency to disengage from the business you’re hoping to sell. At this point, it’s probably more important than ever for the business to be doing well. If potential buyers can see you’re putting time and effort into running a tight ship, they’ll be more inclined to do business with you.
Financial Plan
No matter how you plan to exit your small business, it triggers several financial events you’ll need to account for. Talk to Small Business BC’s Business Broker and let them guide you through the financial considerations involved in the brokerage process.
Here to Help
No matter what stage of business, or what problem you face, Small Business BC offers a range of seminars and one-on-one advisory sessions to suit any business.
