Exit Strategies: A Report on Small Business Growth Planning

This report analyzes and evaluates various exit strategies available to small business owners, including liquidation, transferring ownership to family members, selling to employees or managers, and selling in the market. Liquidation involves selling assets to cover debts but often yields lower returns. Transferring to family can maintain legacy but may face challenges with differing skills and interests. Selling to employees leverages their familiarity with the business but may introduce financial risk aversion. Selling in the market can provide a quick exit with potential for maximum price, depending on the business's profitability and goodwill. The report discusses the advantages and disadvantages of each strategy, providing a comprehensive overview for small business owners planning their future growth or exit.

PLANNING FOR GROWTH

TABLE OF CONTENT
Introduction...................................................................................................................3
Exit strategies............................................................................................................3
Recommendation......................................................................................................8
CONCLUSION..............................................................................................................9
REFERENCES...........................................................................................................10

INTRODUCTION
Exit strategies refer to various plans of small business owner in order to shut down
its operation or expand in future so that it can improve its market share and sales
volume. This report analysis and evaluates various exit strategies that a small
business can use in future for smooth operation and functioning in the market.
EXIT STRATEGIES
LIQUIDATION OF SMALL BUSINESS
It refers to selling of all the tangible and intangible assets of a particular company
while closing of its all functioning. Liquidation is the last step to be performed by the
small businesses when they are not left with any option to clear it’s outstanding debt
and liabilities of company (Afrahi, Karim, and Fernandes de Arroyabe, 2018). Many a
times small businesses aren’t capable of clearing all it’s due which are currently
prevailing in the market which are being occurred due lack of managements skills of
the business function. Small businesses aren’t capable taking of higher risk in the
market as these businesses have small goals to be achieved by the individual.
Individual is only the source left with the company to earn its revenue and run it’s
functioning in the competitive market. Small businesses are in form of sole proprietor
so in this type of business activity it all depends upon the sole person whose is the
owner of the firm to covers of its all risk played by the business owner in the market.
All the activities are being hand over to the purchaser of the small business.
ADVANTAGES
1. This process is easily under stable as it is being done by the business experts or
the business law which are in prevailing in the guidelines of the business law in the
market of a particular area. Calculations are based on simple rules which don’t
require any hard mathematics formulas to solve the process.
2. As all the assets are created by the sole proprietor in the small businesses so
there is no such higher risk involved in the business activities which were already
controlled by the owner in the past period of time. Therefore, it’s easy to wound the
business activities easily. Selling of the assets quickly which were created in the past
by the sole proprietor of the small businesses results in the completion of task within
the time period.
DISADVANTAGES
1. While doing the process of liquidation small business gets lower results in terms of
money from the money invested in the building of assets. Amount is only gets on the
basis land purchased by the owner of the small businesses or any machine or
vehicle which are easy to sale to get the return to overcome the dues which been
already created in the past due to lack of management skills by the owner of the

small business. No goodwill value is being provided by the clients who are ready to
undertake all the dues of the business, as all its worth is lost in the market due to
liquidation of the small businesses.
2. All the assets rather than land are being sold as used equipments or second hand
parts in the market which provides lower return over the invested capital in the
business.
3. Selling of assets in the process of liquidation firstly claimed by the creditors if any
prevailing in the accounts of the small business which is being ready to make its exit
from the competitive market.
LIQUIDATION OVER THE TIME PERIOD
In this process of exit strategy for small businesses owner of the business tries to
covers all its return over ther investment made during the business period before
closing or selling up the activities of business. As business owner from this point of
time tries to cover all its revenue rather than investing on the expansion and growth
of the business (Arshed, 2016). Owner of the business focuses on the covering of all
the risk which are being created as dues in the business activities as soon as
possible that’s effect the expansion of company which results in liquidation of the
business before closing or having a stopover the time period. In this type of situation
owner of the business tries to extracts the best outcome or results which may be
useful for the owner of the business rather than thinking of the business survival
lifestyle in the market. Maximum outputs are been covered rather than inputting as a
capital in the business. Owner does this task by drawing salary or dividends in large
amount before closing of the company activities.
ADVANTAGES
1. Company owner focuses on taking out maximum cash from the business
activities before closing of the business. Withdrawal of cash from the business rather
than investing will results in liquidation over time period of the business.
DISADVANTAGES
1. Growth and expansion stops due to taking out of all profits from the business. This
effect the sale value of the business as the owner only focuses on extracting the
return over the investment made by him in the past and not maintaining in the
current business period.
2. If company is owned by more than a person then it may lead to chaos in the
process due to unequal distribution of the share. Every individual owner has right in
the company building process so return should also be distributed equally among the

entire shareholder. Shareholders have the rights to do objection in the process of
liquidation over time.
3. As owner takes out profits in terms of salary which comes out as tax paid of a
person income, whereas company can gain tax over the profits which is being
already in the company that gives as increment in the value of the company activities
when business is being sold.
TRASFERING OF OWNERSHIP BUSINESS TO FAMILY MEMBER
Many people believe in creating their own legacy through passing all its business
activities to family member so that name of the business remains the same between
the customers in the market. Creating a legacy generate employment between the
family members so that the status and name is maintained in the market in long
business term (Vanhuysse, 2019). All business customers are ready as it’s having
business activities for long period of time next generation only needs to have check
over the activities which are being performed in the business. It’s always being a
dream of small business owner to continue business after the retirement of main
head as it would be followed by the member of the same family. Business activities
are followed identically through little modification as it’s done in the past by the name
of the company. This helps in creating of goodwill in the market as the same task is
performed for long time creates faith in the heart and mind of the customers or
people prevailing in the market. Legacy means transferring of business to another
generation same as its performing its activities in the current period of time.
ADAVANTAGES
1. Its helps in accomplishing of long term goal as set in the past by the owner of the
company. As vision of the company is to achieve long term goal so there is no doubt
in the mind of the investors of the company. Maximum utilization of resources are
been done through various mind in the company as owner changes from generation
to generation over the business time period which help company to grow its business
in competitive market.
2. Every business needs investment to run its day to day expenses. This helps in
decreasing of amount which require as capital in the company. Family member who
wants to contribute in the company results in additional growth of capital which may
b required in future to sustain the business in the market. This may results in great
success in the future for the company.
3. Business is all about trust between the people. Most of the successful business
needs to have trust worthy people or owner in the company to achieve the goals.
Transferring of business to family member has no trust issues as their blood relation
people are running business from so many years in the market.

DISADVANTAGES
1. Profits are the outcome of how much interest is being taken by the business
owner. Interest and skills vary from person to person. Many a times family members
are being forced to continue the business activities which may prove to be wrong
decision as no skills or interest will leads to lower down the growth of the business.
2. New management may not able to satisfy the needs of clients of the company.
This may results in rejection of management by the clients of the company. As
business activities are run according to the needs of clients. So every management
isn’t capable of fulfilling the required the desire of the client in the market. As skills
and mind set vary from person to person.
3. As every individual have its own goal. Family members may have issues in terms
of ownership, authority, power etc, which may leads to chaos in the firm. This may
results in closer of business or may have fight between the family members in
regards of business.
SELLING BUSINESS BETWEEN THE EMPLOYEES AND MANAGERS
Employees or managers which are currently working for the company to achieve the
goal may have the interest in buying same business. As employees have great
knowledge of the company’s business operation (Meltzer, 2016.). Every individual
has dream of owning of a business in which he is providing his valuable time by
giving services in return of salary. Good managers have a eye over the business
operation to manage the resources properly in order to receive higher profits through
sales.
ADVANTAGES
1. Development of business is in the hands of managers and the employees working
within the company. So, they are familiar with operations of the business. Getting of
ownership will boost their moral level to achieve the goal more effectively and
efficiently.
2. Loyal employees of the business get this opportunity as they are able gain the
belief level of the owner. This helps in motivating the employees among the
company. Motivated employees give more hard work to make a successful business.
3. This process may allow to have share in the business as you have served the
business past years. You might get the opportunity to give the advice in the company
as you have gained the experience from long business time.
DISADVANTAGES

1. All employees has a mind set of fixed income (salary) being taken from the
company. Business is all uncertainty it doesn’t make profits on fixed basis. They
might not to suitable for taking risk which is involved in the business.
2. Due to change of management clientage of the company may affects the
business. As changing of management might not be getting in touch with the clients.
SELLING OF BUSINESS IN MARKET
It is the most common and popular strategy for exit of the small businesses. When
owner decides to sale the business it can be avail by anyone prevailing in the
market, who can able to pay the price as decided by the owner of the business
(Farhat and et.al., 2018). This is done to have voluntary retirement from business by
taking up the cost as demanded by the owner. Price of the business depends upon
the condition of business continuing in the market. After taking up the amount from
the buyer, seller needs to walk away from all the operation of the business activities.
ADVANTAGES
1. Profitable business is easy and quick to sell as people invest on guaranteed return
over the period. This is the safest form of selling business. As give and take relation
are maintained between the parties.
2. Maximum price can be obtained from maintaining the assets and goodwill. These
things attract more customers as everyone want to invest in safe zone with high and
guaranteed return over the business activities. Valuation of business is done on the
basis of past business accounts maintained by the owner of the company.
DISAVANTAGES
1. It’s very difficult to sell the business which is earning marginal cost in the market.
As no one wants to invest in the lower return over the business activities. Finding
Potential buyer is a difficult task to be performed in this process.
2. Business activities many a times are difficult to b calculated in terms of money.
Valuation of business can’t be calculated as business profits aren’t only the scale to
measure a sustainable business. This may affect the selling price of business as
expected by the seller in the market.
TAKE OVER THE BUSINESSES
Small businesses run on small scale in the market. Business which is running on
large scale to generate higher profits from the market tries to acquire small
businesses so as to use their resources and converting them into the higher

formation of profits for the large business (Sartor, 2017). This may be done for the
growth and expansion of large business by acquiring the small businesses to be
controlled under the policies as made or decided between the business owners.
ADVANTAGES
1. Purchasing of small business May results in maximum profits and quick sale of
product in the market. It makes easier in forming of business as acquiring an
existence business gives help in availability of resources or making things happen as
done in the past period of time.
DISAVANTAGES
1. When purchasers are only looking for reducing the competition of business in the
market than it may affect over the jobs of the employees which are working since last
period of time. As they make restart business for the sake of higher profits.
2. Business may get affected after taking over by the purchaser. Financial
information and customer list are the only motive to generate the profits by working
over it.
OFFERING BUSINESS TO PUBLIC
It refers to selling of business activities to group of people who are interested in
investing in making profits over the investment made to purchase the company
shares (Kuo, Tseng and Chen, 2018). It’s an open offer made by the seller to exit the
business by the seller.
ADVANTAGES
1. Offering business to public may result in higher profits. As capital investment
made by the public company to purchase the business would be high in terms of the
amount.
DISAVANTAGES
1. Converting business into public company needs higher amount of investment. It is
costly process to be performed by the seller.
2. Capital invested in the forming the public company have rights to check the money
raised to expand the business and convert it into higher returns which have to be
divided among the shareholders.
RECOMMENDATION
From above analysis it can be stated that every strategy has its own specialty
to exit small businesses. These strategies are used according to the needs of the

seller of the business owner. While exit small businesses everyone needs to check
the need or demand or want which are being get in return from exiting a business.
Whether it’s for money or for covering losses in the market made during the business
period due lack of management in the company (Sartor, 2017). If anyone wants to
continue business activities for long term in the market then transferring of ownership
to the family member is the best strategy to exit the business. As business formed on
legacy have the same goal for long period of time. It can also do by selling its
activities to loyal employees working in the company from past time. This would lead
to higher profits and succession of business in the market as its performing all its
activity to achieve the long run goal as decided from the starting. These all strategies
have different policies which need to follow by everyone in the market to exit the
business. Strategies are formed to maximize the return over the investment made in
the business by the seller. Whichever strategy is approved by the business owner
should implement all its function by planning which will give better result to exit the
business. Planning of these steps for exit the business may give higher return over
the invested time, money, risk etc. Exit of small businesses with legal formality and
through above strategies will be beneficial for the company in terms of return. But
Fat duck restaurant is planning for expansion of its business and operation so by
merging with another growing firm able to enhances its market share as both
companies by sharing each other resources and brand image can influence
customers to prefer products and services of company. Another reason both firms
by merging can easily expand its market share and profitability as both have diverse
knowledge, asset resources in order to satisfy needs of customers beyond their
expectancy. Therefore exit strategies are preferred by owner as per needs and
demand to expand business or to close down operation by paying all debts and
liabilities.
CONCLUSION
From the above report it can be concluded that small business have to plans it
various exist strategies to face various situation in future time. It can also be
explained that there are number of option or strategies for exist of small business but
it depends upon choose and plans of owner to shut down its operation or expand
more in order to increases its sales and profit margin.

REFERENCES
Books and Journals
Afrahi, B., Karim, M. S. and Fernandes de Arroyabe, J. C., 2018. Effect of
entrepreneurs’ emotional disengagement on entrepreneurial exit strategies.
Alarcón, J. A., 2017, January. Comparison of Strategies for Ideal Economic Dispatch
of Energy Resources Including Input-Exit for Thermal Plants. In Simposio
Internacional sobre la Calidad de la Energía Eléctrica-SICEL (Vol. 9).
Arshed, J. P. N., 2016. Exit Failure and Success.
Farhat, J and et.al., 2018. New directions in entrepreneurship research with the
Kauffman Firm Survey. Small Business Economics, 50(3). pp.521-532.
Hechavarria, D. and et.al., 2019. High‐growth women’s entrepreneurship: Fueling
social and economic development.
Kuo, C. M. M., Tseng, C. Y. and Chen, L .C., 2018. Choosing between exiting or
innovative solutions for bed and breakfasts. International Journal of
Hospitality Management, 73. pp.12-19.
Lavrutich, M. N., 2017. Capacity choice under uncertainty in a duopoly with
endogenous exit. European Journal of Operational Research, 258(3).
pp.1033-1053.
Meltzer, R., 2016. Gentrification and small business: Threat or
opportunity?. Cityscape, 18(3). pp.57-86.
Murphy, G. and Tocher, N., 2017. Diversification in small firms: Does parental
influence matter?. Journal of Small Business Strategy, 27(3). pp.25-38.
Sartor, M. A., 2017. Host Market Corruption, Subsidiary Strategies and Market Exit.
In Academy of Management Proceedings (Vol. 2017, No. 1, p. 10015).
Briarcliff Manor, NY 10510: Academy of Management.
Vanhuysse, P., 2019. Silent Non-Exit and Broken Voice. Early Postcommunist Social
Policies as Protest-Preempting Strategies. Südosteuropa, 67(2), pp.150-
174.
Yegorov, I., Dower, P. M. and Grüne, L., 2019. Synthesis of control Lyapunov
functions and stabilizing feedback strategies using exit-time optimal
control. arXiv preprint arXiv:1906.02703.