• Mergers and acquisitions

Businesses go through ups and downs, and when a business is losing money, mergers and acquisitions can help bring stability to the business. A merger brings together companies that have complementary abilities so that they can create a new entity. Mergers offer incredible flexibility for a business owner, as the owner may choose to sell their stake in the business or remain involved with business management.

An acquisition involves the entrepreneur finding another business willing to purchase the entire entity from the business owner. It offers some flexibility in getting a good return as there are keen buyers and a willing seller. This opens up the opportunity for negotiation based on the value of the business. If the business is perceived to have high value, various acquirers can begin bidding to own, giving the business owner the chance to benefit significantly. These are a better option than simply closing the entire business by stopping operations.

• Private equity buyout

Private equity buyouts are an excellent option for young companies experiencing challenges in scaling their operations. They work by a private entity acquiring stakes in these young businesses either with financial injections or offering value in expertise. The private equity buyout aims to help the business scale up, thus increasing its value and to own the business while building their potential eventually. The equity bought is in small quantities over time, and there are often some operational conditions included within the agreement. The benefit for the investor is they purchase the company and can realize a good return as the value increases over time.

• Initial public offer (IPO)

Rapid business growth is excellent, though, in the process, the business owner may realize that they do not have adequate funds to take the business to the next level and maintain consistent growth. This issue occurs with a business that is several years old and appears to have achieved a peak in success. At this point, a key consideration is taking in public investors through an IPO. IPO stands for initial public offering, indicating the first time the shares of the company are available to the public, often at a low price that is bound to increase in value.

The business will need to have achieved a pre-determined minimum amount in pre-tax earnings over at least three years. Also, planning for an IPO is expensive, so the company should be stable enough to go through the entire process unscathed. Once the shares are sold, they will then be traded on the stock exchange, and a pool of numerous investors will become a part of the business. The entrepreneur may choose to sell all their shares, giving the business to the control of a management team and board, and therefore ending involvement with the business and getting a good return.

Any business owner who chooses an IPO as an exit strategy should be ready for scrutiny from business analysts who are determined to define the value of the company. Financial documents need to be clear and up to date, going back as far as the company has been in existence.

• Liquidation

This should be a last resort option as it is equivalent to simply closing the business down. When this is the option, there are often challenges around debt, revenue, and profit. Liquidation requires the sale of all the assets so that creditors can be repaid the amount they are owed. If there are any funds left once this is done, the balance is divided between different shareholders to return for their investment. With so many ways to keep a viable business operational, this is one exit strategy that should not be considered unless necessary, and there is no alternative.
