7 Exit Strategies For Virtual Business & Small Business Owners

So you decided to start a business… now what? Before you get caught up in the daily routine of growing your company, take a step back and think what you will do with your business AFTER you spent all those thousands of hours building it. Or, if a tragedy strikes, ask yourself, what will happen to your business then?

Don’t have a clue?

Don’t worry, you are not alone. Most virtual business or small business owners do not plan that far out, they are just trying to make it through the day. So I thought I’d give you a few ideas on the best way to transfer or sell a virtual business when the times comes, this way you will have a clearer idea of where you are heading even before you start.

Remember though, the key to building a business ready to be sold at any time, is to remove yourself from the daily operations. This is the reason why, it is imperative to build a process driven, instead of an owner driven company. If you eventually do not make this transition, your business will be worth less and you will most likely receive less for your company!
Here is an overview of the best 7 virtual business (or small business) exit strategies:

  1. Employees: A few methods to selling a virtual business to your employees are the ESOP (Employee Stock Ownership Plan), an MBO (Management Buyouts) and MBI (Management Buyins)
  2. Charitable Trusts: This is a great strategy for those virtual business owners who want to benefit from charitable giving. A few methods are CRTs (Charitable Reminder Trust) and CLT (Charitable Load Trust)
  3. Family: This is when you want to transfer your virtual business to your children or a family member. A few methods are gifting stock, GRATs (grantor retained annuity trust), FLPs (Family Limited Partnerships), SCINs (self-canceling installment notes), IDGTs (intentionally defective grantor trusts) and private annuities.
  4. Co-owners: When buying out a partner the co-owner transfer channel is a good method. It includes buy/sell agreements, rights of first refusal provisions and other transfer techniques.
  5. Retire and Sell to an Outsider: When retiring, numerous of the previous mentioned methods can be used. Such as charitable trusts, private annuities or grantor retained annuity trusts.
  6. Continue in the Business but Sell to an Outsider: This strategy is usually implemented when an owner needs growth funds but does not want to invest personal assets. It can be sold to a private entity or to a public one.
  7. Going Public: This is the process of offering securities (common or preferred stock) of a private company for sale to the general public.

Small Businesses – Small Changes Drive Explosive Profits

Many of my small business clients believe that growing their business is a huge task and they are often reluctant to take it on. But once I demonstrate how small changes can result in explosive profits, they are keener than ever to embrace the challenge.

If you want your business to be successful over the long-term you need your business to operate profitably. The first step in managing your business success is establishing clear goals and selecting the Key Performance Indicators (KPI’s). The key performance indicator not only has to act as a measure of business performance, it also has to drive behaviours in line with your organisation’s vision, mission and values.

Many small business owners uses Sales Revenue as the Key Performance Indicator for their organisation, but there are several problems with this KPI. The first is that it is entirely possible to increase sales revenue significantly but still run your business into the ground. The second is that it can drive behaviours that are not in line with your business values.

The better choice of KPI to measure business success is Net Profit. This is the bit that is left over after you take out all the costs of running your business. If you are not making a profit, chances are better than good that your business will not survive in the long-term.

Understanding the elements that drive profit in your business and managing them as discrete processes in their own right can help you better understand where your focus needs to be in order to make the small changes that will drive explosive business growth and profit.

The first step is to become familiar with how Net Profit is derived. Then we will take a look at how small changes in each of the elements of this algorithm makes a big impact on the business’s bottom line.

The Net Profit equation looks like this:

Sales Cost of Goods = Gross Profit Expenses = Net profit

If we substitute numbers it would look something like this (and typically in about this proportion):

$100,000 – $70,000 = $30,000 – $20,000 = $10,000

Once you know the elements that drive the Net Profit, you can begin working on those things that will help improve your business performance.

Say, you made it your goal to improve each of the profit elements performance by five percent. Would your business experience a five percent improvement to Net Profit? The short answer, and probably not one you are expecting – is no. Because this is where the magic happens.

Using the above figures as a starting benchmark, you put your head down and you improved each of the elements by five percent.

You improved your online marketing which helped to drive the much-needed five percent increase in sales. You took a look at your cost of goods sold, and armed with your previous years purchasing records, you negotiated a five percent discount with each of your suppliers. You put your business expenses under the microscope and found five percent savings by changing from landline to VOIP for all your internal calls and negotiated better deals on other expenses. Seems like a lot of work for just five percent improvement.

Let’s take a look at the impact these small changes have made to your business’s bottom line.

The equation would now look like this:

$105,000 – $66,500 = $38,500 – $19,000 = $19,500 Net profit

Amazingly, a five percent improvement in business performance for each of the elements across the board, has nearly doubled your net profit!

Top Marketing Strategies For Busy Small Business Owners

Marketing strategies for busy small business owners do not have to be time consuming, but you do need to prepare so you can market your product or services effectively and efficiently. Here are some ideas to help you get the most out of marketing when your time is limited.

Identify your target market so you do not waste money and time reaching people who have no interest in your product or service. Then think about your customer. Will they go to the ballpark? Will they read a particular type of magazine? What do they do in their leisure time or for work? Perhaps, your market could even be people who practice a particular religion. Once you have identified the specifics about your targeted customers who read, you can then spend your money marketing in the right place. Specialized magazines, journals, professional organizations, and directories may all reach a particular type of client. Focus on marketing where your targeted audience is most likely to learn about your product or services.

Talk about your business because people who know you are likely to make referrals. In the course of your day, mention your business to people you interact with on a regular basis and carry business cards with you. Reach out to a larger audience by donating services to a fundraiser or event. If you are donating products or services, make sure you have appropriate signage or business cards so potential clients know what you are doing. In addition, offer existing clients a small discount for referring clients.

Consider including a voucher with your advertisement, particularly if you are attracting a client that will provide repeat business, it makes sense to offer a slight discount to obtain initial business. You can also exchange business cards or marketing material with a business that complements your own. Referring each other clients or giving each other space to market can be beneficial to both businesses and requires little more than mailing each other material and placing it in your business where clients can see it. Additionally, create an online presence by creating a website.

You will be able to reach people world-wide with minimal effort and provide information on your website that will give potential clients a broader overview of your products or services that an advertisement cannot accomplish. These simple marketing strategies for busy small business owners should help maximize your marketing with minimal time.