How to exit your small business gracefully

Posted by Mark Auerbach on April 10, 2014

There may come a day, when you seriously have to debate whether to keep your business going, or whether it’s time to close down and move in different directions. The choice as to whether to go on or not may not be totally yours, but how you handle communicating your next steps may save your business, your brand, and your reputation.

There are many different scenarios that play out every day. Your company may be going bankrupt. You may be retiring and deciding to close the business. You may be selling the business. You may be taking a job with a company and closing the business. Despite the variations, your action and game plan involves many people: your board (if you’re non-profit), your employees, your clients, your vendors, and your customers.

John Bidwell owned the cutting-edge strategic marketing and branding agency Bidwell ID for a dozen years. Under his direction, the Western Massachusetts company worked with national clients from Health New England and New England Public Radio to Mass Humanities and the National Yiddish Book Center. Baystate Health, one of his clients, was creating a new marketing role. They encouraged him to apply, and he was offered the position, one that interested him on many levels.

Once he decided that Baystate Health was right for him, it was a long transition to wind down. “I had loyal employees, clients, and vendors who would be affected by my plans,” he says. “I basically had two options: sell the business to my employees or an outside buyer, or close doors. I chose the latter. There’s a time to open a business and a time to close a business, and this was that time.”

He and his employees completed the projects on the table, and Bidwell continued to help clients transition to other options as he moved on to Baystate Health. “Aside from making sure I closed the company with no outstanding debt, it was important to leave on a good note–on good terms,” he says.

A friend of mine, who asked to remain anonymous, also ran a small full-service advertising agency. One major client went bankrupt, and my friend was stuck with the bills for their media buys. He had to lay several people off. He couldn’t replace the business volume, and had no choice but to file for bankruptcy. He told his current clients that he could provide design services as a freelancer, and would refer other services to agencies that could help them. He felt that honesty was the best policy, although he did not divulge the client who had stiffed him. He took the high road as they say, and his clients, although sad that the agency was closing, felt secure in the transition.

I had a difficult call from a former client, a highly regarded CEO of a small non-profit business (who has become a personal friend). He had just been diagnosed with an aggressive, often terminal illness. The CEO, concerned about a transition to new leadership, and the ongoing confidence of board members and donors, wanted a transition strategy, “just in case.” It was very important for the CEO and the board to project a position of competent leadership in place, and “business as usual.”

The strategy developed included an action plan to notify the organization’s major constituencies in a positive manner; the selection of a spokesperson who could ably instill confidence while answering inquiries; and a plan for dealing with the media (many of whom were personal friends of the CEO). The CEO insisted on honesty, while maintaining a sense of privacy.

Always have an exit strategy.

1. Know which constituencies will be affected by your announcement. These groups can include your board, your staff, your employees, your customers, your vendors. Realize that all will be affected differently.

2. Before you announce, how will you provide transition support to each group? Will you complete outstanding work for clients? Will you ask another firm to complete the work? Will you offer your employees a good severance and provide references? Will you collect monies owed and pay your debts?

3. When you announce, you’ll want to be honest with those people you tell, even if you think people will act adversely. There’s no shame in going bankrupt. There’s nothing wrong with closing your doors so your spouse can take a job across the country. If you’re closing because you have an illness, you can be honest and say “I’ve some health challenges ahead, and I can’t devote the needed energies to that and run a company. If I’m only ‘half there,’ my employees and clients will not get the service they deserve.”

4. Decide who the official spokesperson is for each constituency. Is it you? One of your account executives? Your office manager? The designated person should have talking points, and practice answering questions. Sincerity is a plus. When you look and sound like you’re delivered a prepared announcement, people know it’s a prepared announcement.

5. Take the high road. Don’t trash the company who stiffed you and forced you to close shop. Don’t bad-mouth the competition who made your work life bad. A good reputation follows you everywhere and opens doors. A bad reputation precedes you and closes doors.

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Mark G. Auerbach is principal at Mark G. Auerbach Public Relations, a Springfield, MA, based marketing, public relations, development and events consultancy. You can find more information about Mark at Facebook and LinkedIn.

 

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