Whether a business is successful or not, preparing a reasonable and realistic exit strategy in advance provides every investor with some assurance and reduces the investor’s risk. A sound exit strategy will also affect decisions on business development and growth positively.
It is perceived as a normal part of the business life cycle in the U.S. to be able to step into more profitable businesses by making a successful exit from a business that achieves its goals, or in case of a failure or loss, to shift your capital to more productive areas to minimize your loss.
A comprehensive exit strategy requires the following:
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An accurate calculation of your financial situation, both personally and professionally,
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Planning your next business, and life after the exit, and
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Revealing your possible investment options.
A good exit strategy should be open to updates depending on changing circumstances.
If you may experience any concerns making decisions while working on these calculations or plans, it would be helpful to consult a professional.
As part of the exit strategy, you may have options to sell your shares in your company to family members, friends, partners, employees, other investors, or to another company.
Each option would have different tax consequences, and it may positively or negatively affect the future of your business which you bring to a certain level after working for years.
Finally, liquidating and closing your company is surely among your possible options as well.
Planning your exit strategy in advance – especially taking into account tax and business law rules – and then implementing it when necessary will increase your profitability; and will optimize your loss and risk perception.
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