Different Exit Paths for Business Owners
Let’s begin with a fictional-company case study. Ben (55), Tom (45), and Larry (35) purchased Front Range Powder Coating from its former owner. They paid book value of about $1 million. Now, seven years later, they are at a crossroads: Ben is interested in reducing his role in the company and has approached Tom and Larry about purchasing his one-third interest. However, there’s a kicker. Ben is not interested in selling his interest on the same basis as he acquired it (book value). Instead, he wants one-third of the company’s fair market value. Since the company had increased its book value to $2.5 million and its annual cash flow from $200,000 to more than $2 million, Tom and Larry faced a major cash crisis and wondered whether they should proceed with the buyout.
Learn all of the different exit paths a business owner can take!