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"Begin with the end in mind," says Stephen Covey in his book, "The Seven Habits of Successful Living." Those who have created a successful business know it does not happen without planning, hard work, and luck. Yet many have no exit plan for leaving their business.  

The Four D's of a Business Exit

Take the time to look at the four D's of a business exit strategy: death, disability, divorce, and departing. 

• Death: The death of a business owner should be considered during the early stages of a business. 
• Disability: Death is not as likely to end the business relationship as completely as a physical or mental disability. 
• Divorce: Divorce may be complicated by the personalities involved. Partners not even be a part of the dispute may be affected financially.
• Departure: You may decide to leave for another opportunity or to take life easier. Who is going to do the work? Where is money coming from? All important considerations for your business exit strategy.

For the small business owner, each one of the four D's has special demands on: family, income, taxes, and transfer of control of assets. The concerns of the family or income can conflict with the business. Reduce conflict by developing a fair agreement before the exit occurs. 

Creating a Business Exit Strategy

If you plan to exit your business and transform your equity into cash through a sale, merger or IPO, you need to prepare for that every step along the way. To help, here is an overview of some business exit strategies for you to potentially pursue.

1. Sale - The most common exit strategy for any business owner is to sell the business to someone else or to some other company. A sale typically results in the seller of the company receiving cash in exchange for the assets of the company. The tricky part of any sale is preparing the company for sale and valuing the company.

 2. Mergers  - A merger is when two companies get together, establish a value on each company, and then combine the two to form one bigger company. In most mergers, one company shareholders receive stock in the other company which is usually worth more than each independent company.

3. IPO - You can also sell your company via the stock market in an initial public offering or IPO. The good news is that you stand the chance to get the biggest dollar payout of any exit strategy. The bad news is that it is very expensive to obtain an IPO, and you can easily spend half-a-million dollars on attorney and accountant fees. 

4. Buyout - A buyout is when someone comes in and takes over your business. You'll usually see this happen with small- to mid-size businesses that provide professional services. Usually, you'll get a better deal if the acquiring company can pay upfront rather than doing a "leverage buyout" where future earnings are used to pay buyout debt.

5. Liquidation of assets  - Simply closing the business is also a viable choice. The process is simple: Lay off your employees, sell the company assets, refer your customers to other suppliers, pay whatever bills remain, shut the doors and walk away. It is the most straightforward exit strategy, but is generally the least rewarding.

Business Exit Strategy

Planning how you exit your business is just as important as planning how to start it. In both cases, the goal is to maximize the value of your company. When you start a new business, or grow your existing business, you need to also think about your business exit strategy. The way you plan to exit your business is a major factor in determining how to run your business. 

The great American dream is to: build a business of your own; bring it to life; and make it successful. How you plan your exit strategy will determine how well you maintain the success of the business when it comes time to leave it.