Ways to exit a business
Every business owner will eventually exit their business. Reasons for exiting a business include decreasing profits, increasing competition, changes in health or life goals, retirement, passing it on to family members, or cashing in on your goodwill and success. You may even decide to exit your business because it is growing too quickly. Some owners exit their business voluntarily, while others may have no choice.
You need to prepare for exiting your business, as it can be a lengthy process involving various financial, legal and operational obligations. The idea is to have your business in the best possible shape before you exit.
The following are the most common ways of exiting a business.
If you have spent many years developing and growing your business, the idea of selling your business on the open market may not be as appealing as passing it on to someone you know and trust. This type of exit strategy is known as succession planning.
Succession is about ensuring the ongoing success of the business through a smooth transfer of control. This requires a lot of planning. A formal succession plan should define exactly who will take over the business, when they will take over the business and how they will take over the business. Learn more about succession planning.
Closing your business
If your business is failing it may be difficult to sell. In this case you may decide to close it down. Closing a business involves selling off business assets, paying off your debts and keeping whatever money is left. In extreme situations, closing a business may involve an official declaration of insolvency (e.g. bankruptcy).
There are a range of legal requirements involved in closing a business, as well as financial and emotional costs. These costs will affect you, your employees, and other stakeholders in your business. Learn more about closing a business.
Selling your business
Deciding to sell a business is usually a major decision in a business owner's life. Planning the sale of your business involves making specific decisions about why, when and what you are selling, and who you are selling to.
Financially, the best time to sell is when your sales and profits are increasing. The market will then put a higher value on your business and motivate potential buyers. Learn more about selling a business.
- Read about changing, pausing, closing or selling your business from the Australian Taxation Office.
- Learn more about valuing a business.
- Find out about managing people through change.
- Read how Lifeline and Beyond Blue can assist you and your staff through difficult times.
- Last reviewed: 17 Jul 2017
- Last updated: 12 Jan 2022