Pros And Cons Of Exit Strategy

When investing in a business, a person should always have an exit strategy for their business. An exit strategy can be defined in many ways which are: selling to another person or company, a merger which is combining your company with another, and closing the business all together. Whatever is decided, an exit strategy should include auditing, financial records, having a clean balance sheet for at least two years, and making sure all creditors and lenders are being paid (Leggett, 2013). The most important questions when contemplating an exit strategy should be: How much money do I want to do with the exit? What strategy should be taken to exit from the business? Should the company be groomed to succeed and later sell it for a high profit? Selling …show more content…
This is making sure the company turns a profit, all bills are paid to lenders, creditors, and employees, and having a company that has a good reputation (Gladstone, 2004). This is very important when exiting a company. The more valuable the company is worth, the more the investor can get on his investment. Once the company is marketable, the entrepreneur can sell the company and invest it into another venture. Exit strategies has pros and cons. When selling a company you will enjoy a large sum of money at one time. The con of this is paying a lot of taxes on that money. An entrepreneur may end up spending more money than saving in the future. The second exit strategy is finding a buyer. This means a business can still be in existence. The con of this is the emotional bond an owner has in selling a business they have not only created, but worked hard in building over the years. Going public is another way to exit a company. The company can be worth millions in stock and be very profitable to the entrepreneur. This is good for a later exit from the …show more content…
This can keep everything running smoothly without closing the business. The con to this is high transaction costs and the uncertainty of the new owners keeping the business intact. Arms length light is negotiating a price to an interested buyer and selling the business outright. This eliminates transaction costs and paying outside parties. The con is the business owner may sale the business underpriced and they can be short changing themselves a large profit (Hawkey, 2002). The business owner makes to make as much money as possible on their business as possible. That is why even though there are high costs, arms length sale is the better choice because the owner can get a higher price for their business. The strategy behind an exit strategy is making the most of an investment. This is to make sure the company turns a profit, has good accounting, and has a product everyone wants. An entrepreneur may want to consider leaving their legacy to their children (Leggett, 2013). This means making sure they work hard to create a business that is solid for the future and the next generation of the