4 Types of Exit strategy for Family business
In the covid 19, a vast taught says that anything can not control us. It is an out of control in today’s world, like a pandemic. We have to plan before this stage like a flood, vast diseases, loss in business, etc. In 2021, according to the survey, says that one-third of families owning a business, and most have an idea to exit plan from the company. The business owner has a better idea of how to make profitable business ways. The owners start and afford many struggles in the industry. The single person develops from the ground up and banks on success. In the recent, a survey is conducted on 100 Canadian business people. In that, 75% of businessman has an idea of an exit plan strategy. We have seen some exit strategies for family business from the below lines.
Define :
A person operates a business who can exit the company because of age concerns or leave the industry. It is like retirement in business or the sale of business means as an exit strategy. Rare small business use this family business exit strategy. Most vast companies spend most of their time building the business for future growth trends. Different family business exit strategies are used in the business. The types have been identified based on the business’s future growth, family situation, employees, and current business location. The sector competitor is selected when the business is for sale. The primarily large company are taken over by the family members and enlarge the business. When the company does not have family members, they are changed to third parties in the industry, like management or competitor.
Reason :
In some business, the business owner transfer to another family member. It is one of the most considerable assets to his family members. But it is challenging to monetize the business to the current trend. It has yet to be an updated version in the industry. The other company sustains current trends in the current market and uplifts its business. But the newly arrived family members have yet to learn about the current trend and make their way to leave the industry. Most business people create a financial source for their retirement goals and exit the business.
4 Types of Exit Strategy For Family BusinessÂ
The person who exited from the industry used one of the four types of family business exit strategy.
1. Transfer to Family Business :
When a person has no idea to exit and has transferred to another family member. He has given training to them to manage the business successfully. Before the exit, he spends time training for the newer person. The time depends on the business level in the industry. Mostly transfer to children or other family members.
Tata is an example of a transfer to family members. Jamsetji tata founded tata and assigned it to four generations. It starts from Jamsetji tata to Ratan Tata. The company’s chairman was changing from one to another family person.
2. Selling the Business :
When the idea is to sell, it has been prepared for sale by maximizing the returns. They made a cosmetic change to business. By this, marketer has made more demand and increased the price of sales. It has helped to drive growth in the long strategic management process. In this selling process, first, identify the competitor. Enquire about the competitor list for future acquisition. The competitor knows more about the company’s value than others. So they give a reasonable price to his company value.
3. Management Buyout:
In this strategy, the company does not have one succession of people. All employees are trained in the corporate culture. The company is split into multiple shares and given to the employee to take over the company as a type of stock market share. The remaining shares are taken by the company and are called promotion shares. Mostly the promotion share is about 50% stakes in the company. The decision is taken based on the shareholder meeting.
One example of a Management buyout is a computer and technology company, Dell. Michael Dell founded Dell. In 2013, the company became private equity of $25billion as a management buyout. After that, the company exerted more control in the right direction. In 2018, the company was worth $70billion, about 1/3 of its total value.
4. Takeover (OR) Phased Exit :
In this exit strategy for family business, leave the business but still need to complete exit. The company transferred to another person slowly, and the person who will get trained—the person who bought the share from the company and made him a partner. The company stakes may grow slowly. After that, any stage of removal went for another exit strategy.
One example of a takeover exit is Ambuja cement and ACC cement. These two companies are bought for about $6.4billion by Gautham Adani, which makes him as second largest cement producer in the world after Aditya Birla Group. The strakes were a takeover from Holcim Group, Switzerland.
How To Avoid Exit Strategy For Family Business:
To use some strategy to avoid an exit from a family business.
1. Future View :
Before formulating a exit strategy for family business, it is essential to have a retirement plan. Based on the needs, the retirement plan is calculated. After exiting the business, your annual cash needs are calculated. Work with a professional person and get an idea to increase the business’s worth and makes for easier to transition. The increased financial value fits your financial retirement goals.
Give a view to the family members to explore your personality and train other family members. Analysis of the children’s willingness (or) other family members in the business. Do not sell to third parties. Maximize the value of the company.
2. Timing :
Extend the timing of the business to uplift its value of the company. It may increase the chance of success in family business exit strategy. At that time, additional talented people in the organization are selected. Leadership is trained to the person and makes him as chairperson. The innovative idea makes way for further growth.
CONCLUSION :
Start From Now :
The earlier you start planning, the greater the chance for success . The needs are to be analyzed, from business to your current financial situation, for settling your personal and financial retirement goals. The yearly needs are to be satisfied by the financial retirement plan. So start as earlier.
