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Exit Options for Privately Held Businesses

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A business owner has many different options when selling their business, and businesses have a “range of values” that they can sell at depending on whether the business is valued at “fair market value,” “investment value” or “synergy value,” with “fair market value” being the most conservative valuation and synergy value being the highest valuation. Generally, “internal transfers” are value at “fair market value,” and “external transfers” at either “investment value” or “synergy value.”

Here are the different ways business owners can exit their business:

  1. Selling the Business to a Third Party: This can involve selling to a competitor, a strategic buyer, or a financial investor, such as a private equity firm. Selling to a third party is considered an “external transfer,” and is, thusly, valued at either “investment value” or “synergy value.”


  1. Passing the Business on to Family Members: This exit strategy involves succession planning to effectively transfer ownership and management control to family members, which is often facilitated through gifts and/or sales. Passing the business onto family members is an “internal transfer,” so the business would be valued at “fair market value.”


  1. Management Buyout (MBO): An MBO occurs when the business owner sells the business to the company’s management team, allowing the management team to take control and continue the company’s legacy. MBO’s are also considered “internal transfers.”


  1. Initial Public Offering (IPO): Some businesses can go public by offering shares to the public through a stock exchange. IPOs provide both access to capital and liquidity to the owner(s.) IPOs are valued by investment bankers at a price they feel the offering will sell for on an exchange.


  1. Merger or Acquisition: Merging with another company or being acquired by a larger entity can provide a lucrative exit for business owners. M&A transactions are valued as external transfers and the buyer and seller negotiate the value of the transfer.


  1. ESOP (Employee Stock Ownership Plan): An ESOP is an IRC section 401(a) qualified defined contribution plan that is a stock bonus / money purchase plan. Under an ESOP, an owner sells the business to company employees through a trust that holds shares on behalf of the employees and provides employees with an ownership stake in the company, in addition to offering the business owner significant tax saving and flexibility. ESOPs are internal transfers and are valued at fair market value.


  1. Liquidation: Liquidation is defined as selling off assets and closing the business and is often considered a last resort if other options are not viable. Liquidations occur at “market value,” which can fluctuate greatly depending on the circumstances.


In sum, there are several exit options available to business owners and each option has its own implications in terms of financial return, control, and legacy, so it’s crucial for business owners to carefully evaluate their priorities and seek professional advice from a Certified Business Exit Consultant (CBEC) ® when considering an exit strategy.


About the Author

James J. Talerico, Jr. is an award-winning author, speaker, and a nationally recognized small to mid-sized (SMB) business expert.

With more than thirty- (30) years of diversified business experience, Jim has a solid track record and an A+ BBB rating helping thousands of business owners across the US and in Canada tackle tough business problems to improve the performance of their organizations.

His client success stories have been highlighted in the Wall St. JournalDallas Business JournalChicago Daily Herald, and on MSNBC’s Your Business. He was named “Texas Business Consulting CEO of the Year,” by CEO Today Magazine, identified as a “Top 10 Management Consulting Entrepreneur to Watch in 2023” by Entrepreneur Magazine, was listed among the “10 Most Visionary Companies to Watch in 2023” by Inc. Magazine, and has also been ranked among the “Top Small Business Consultants” followed on Twitter.

For more than half a decade, Jim was a regular guest on “The Price of Business,” a nationally syndicated radio program on Bloomberg Talk Radio and has also appeared as a subject matter expert on many FOX Radio interviews. He is a regular contributor to several blog sites and has frequently been quoted in publications like the New York Times, Dallas Morning News, Philadelphia Inquirer, The Entrepreneur’s Review, and on, in addition to numerous, other industry publications, radio broadcasts, business books, and Internet media.

Jim received a Gold “Stevie Award” for “Thought Leader of the Year,” a Gold “Stevie Award” for “Media Hero of the Year During Covid” and a Bronze “Stevie Award” for “Best Entrepreneur” in the Category of “Business and Professional Services” at the American Business Awards ® in New York City. The competition received more than 3,700 nominations and is the premier accolade for business excellence in the US honoring organizations of all sizes and industries. Jim also received an “Outstanding Leadership Award” at the Money 2.0 Conference for his contributions to the financial services industry.

Jim is the author of “8 Steps to Becoming an ETHICS FOCUSED ORGANIZATION,”™ a small business certification program that utilizes a unique eight – (8) step approach for strengthening ethics in any organization. The certification program won the Better Business Bureau’s “Torch Award for Ethics” for the North – Central Texas Region, the Better Business Bureau’s “International Torch Award for Ethics,” and a Gold “Stevie Award” for “Ethics in Sales” at the International Sales & Customer Service Stevie Awards ®. Participants who complete this certification program are eligible to receive eight – (8) continuing education units from the University of Texas’ Division of Enterprise Development.

He received his Certified Business Exit Consultant (CBEC) ® designation from The International Exit Planning Association (IEPA) to help entrepreneurs, small business owners, family businesses, and middle market companies maximize their business exit.

He is also a Certified Management Consultant (CMC) ® and an active member of the Institute of Management Consultants. The Certified Management Consultant ® mark is awarded by the Institute of Management Consultants USA (IMC USA) and represents evidence of the highest standards of consulting, a commitment to continuous development, and an adherence to the ethical canons of the profession. Less than 1% of all consultants in the world are Certified Management Consultants (CMC) ®

Jim has a B.A. in English & World Literature from Rutgers University, a B.S. in Business Administration from Thomas A. Edison University, and he is in the process of completing his M.B.A. from the University of Texas – Arlington.


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