**2.3 Understanding the expectations of the investor**

A business owner's decision to exit the business impacts the stakeholders, especially the investors of the business. Investors may end up making a profit or a loss, depending on how the business owner chooses to exit the business. Even when a family member or employee is taking over, they must know the business owner understands that they want to get their money back from the investment that they make [6]. In the event the business owner chooses to exit, the potential new owner will have the option to move on as well and remain unscathed in the process.

To meet the expectations of the chosen successor, there are several actions a business owner must take. These include the following: -


legal challenges. Legal compliance applies to all the different business licenses and certifications. With finances, ensuring that current audited accounts are available for scrutiny is necessary.

If the business is transitioning into the hands of a successor who wants to keep the business running, the business owner may have the option of keeping their shares. With this, the value of their shares may change, and it will be necessary to educate the successor on the new venture and its goals.

## **2.4 How do you pay back the successors?**

Within the exit strategy plan, it is worth considering the motivations that drove the next generation, or employees to put their funds or even expertise into the business. Most new owners are looking for a way to get a good return. The return may be realized in the event the business being sold, recapitalization, or going public through an IPO. A new owner is interested in knowing the exit strategy for the business owner so that they can be clear on how they will realize a return [7].

To build confidence in the new owner, it is essential to share the plans for the future of the company, especially when it comes to value. It is expected that the value of the company will grow over time, meaning that new owners can look forward to increased returns.

Within the exit strategy, one needs to share the possible time frame for the exit to ensure the new owners can determine whether they will meet their return on the investment. One trap to avoid falling into as a business owner is to forecast what the rate of return will be. The new owner should work on making the calculations on their own based on their understanding and experience. As a business owner, you can support them by sharing financial documents and comprehensive projections.

It is also possible that as a part of the exit strategy, mainly if a deal is in place with another business, shareholders are offered the shares of the other company. The terms and conditions of such an agreement should be hashed out when planning an exit strategy.

#### **2.5 The different types of exit strategies**

It is now clear that there is more than one way to exit a business, and the exit strategy chosen is affected by the goals and intentions of the business owner [8]. Here are some of the strategies to choose from when exiting a business.

Transition to family members or employees

Many entrepreneurs visualize their business is still running if they may have to exit, passing it forward to family members or trusted employees. With this strategy, the business owner can take several years to train and groom their successors so that the transition is seamless. The challenge with this strategy is making sure that the person intended to take over the business can adequately manage the pressure of business operations. One advantage is that though the business owner exits and stops being part of the daily operations, they are often available after the transition in an advisory capacity [9].

• Selling with a broker, or employees

Employees of the business may share their interest in purchasing the business and keeping it running. This often happens when the business owner is retiring and seeking a way to exit the business and get a good return. As an exit strategy, a

#### *Discerning the Strategies for Exiting Your Business DOI: http://dx.doi.org/10.5772/intechopen.98338*

business owner can plan a long-term buyout, allowing the employees to purchase shares and increase their control over several years. This option can even be tied to their benefits or bonuses, which can be a fantastic motivator to ensure that the business attains success. This is referred to as an ESOP (Employee Share Ownership Plan), which clarifies how current employees can purchase stock. Business owners may also seek permission to remain with the business and support the working team from an advisory capacity [10].
