“What are my options?”
“Who would want my business anyway?”
“What would I do if I were forced to close?”
These are some of our clients’ most common questions. With involuntary bankruptcy numbers setting new records each year, entrepreneurial fear is easy to understand.
Even seemingly healthy small businesses can fall victim to the “cascade effect.” Your business may be fine. Then suddenly, customers are paying you slowly. Some might even not pay at all.
You later learn they’ve filed for Chapter 11. That may be good for them, but it’s terrible for you. You’ll likely recover pennies on the dollar – after legal costs – and you could wait a while to collect even those. You might never see certain payments. Just a couple of these situations beyond your control can complicate your own payables and place you in a danger zone.
If the “cascade effect” is not stopped and you become vulnerable to its devastating effects, the risk of alienating customers, employees, creditors and financiers – and even family and partners – increases exponentially.
Legacy’s exit strategies include assessing conditions and developing planned, controlled methods for keeping business holdings, liquidating them or achieving a measure of both to secure the highest possible return for the owners.
The success of these strategies depends on the preparation of the business and its owners for exit and on external factors such as market conditions and industry trends.
Exit strategies can include selling or leasing portions of a business entity, moving portions out of harm’s way (when possible), and extreme downsizing or reinvention. At Legacy, we refer to these plans as forward strategies or liquidity event planning.
An often negative connotation of the term “exit strategy” is the idea of fleeing or escaping a difficult situation (as in “escape plan”). Just as a beleaguered army without an exit strategy can find itself in a quagmire, so can the entrepreneur in a troubled business. We encounter many owners trapped in escape plans gone awry because they did not account for every contingency.
That’s alright. Legacy can usually help no matter how bad things have become. With the able assistance of our legal risk strategists at our wholly owned subsidiary, “LA LAW,” our experts can take on even the most fearsome conditions.
The primary issue becomes seizing the moment and deciding to learn about available options. Sooner is always better than later in developing potential exit strategies.
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