^Blog Planning Your Business Exit

Key Options to Consider

Exiting your business is one of the most significant decisions you will ever face as an entrepreneur. Whether you’re looking to retire, pursue new opportunities, or simply step away from the day-to-day operations, it’s important to carefully evaluate your options. Each path comes with unique advantages and drawbacks, and the right choice will depend on your goals, your financial needs, and your family or employee dynamics.

Below are three of the most common exit strategies for Canadian business owners.

Transitioning to Key Employees

One option is to sell your business to key employees who already understand the operations and have contributed to your success. This approach can reward loyalty and provide continuity for the company. However, most employees don’t have the capital to buy you out upfront. Typically, you would provide them with shares in exchange for a promissory note, which they pay off over time through business profits.

While this can work well, it often requires the owner to remain involved in the business longer than expected, ensuring profitability and responsible decision-making.

If things go wrong, it will often pull the retired owner out of retirement and back into the position of stewarding the company, to ensure they get paid out on the promissory notes.

Passing the Business to Your Children

Another option is to transition the company to your children. This allows you to maintain your legacy and keep the business within the family. If your children have strong business acumen, this strategy can be rewarding.

That said, family succession often comes with emotional and financial complications. Many parents step back into the business if it struggles, sometimes even drawing from personal investments to keep it afloat. It’s important to weigh your children’s capabilities and your willingness to step back in if challenges arise.

As with a sale to key employees discussed above, most children will not have the financial resources to pay for the shares outright, often leading to payments over time. This can put the parents’ retirement plans in jeopardy if the business doesn’t remain profitable enough to make these payments.

Selling to a Third Party

For many owners, selling outright to a third party is the cleanest way to exit. This option often provides the most financial security, as you typically receive a large portion of the sale price upfront. While you may need to stay on for a transition period, it allows you to fully retire sooner and with more certainty.

The trade-off is that family members or employees who hoped to take over may feel disappointed. Clear communication is essential to avoid conflict.

Exiting your business is more than a financial transaction; it’s a life transition. Thoughtful planning, open conversations with family and employees, and guidance from experienced advisors can help you choose the path that best aligns with your goals.

Visit Three60wealth.ca to learn more.

Authored by: Jason Nagel, at Three60 Wealth