Exit Your ISP Your Way

Financial planning takes time ... and the right time to plan for exiting your ISP operation is right now. Before outside forces influence your goals, build a plan for withdrawing from the business on your terms.

by Mark E. Battersby
[November 22, 2000]

Whether your ISP business has grown and prospered or is marginally successful, exiting the business may be one of the most important things you ever do.

Unlike almost every other business decision that you make, exiting your ISP business on your terms can only be done once. You get one chance to decide how, when, and on what terms you'll make your exit.

Make your getaway
Planning a successful departure requires as much attention as growing your ISP into a profitable business venture. For the most part, your ISP exit strategies consist of four options:

1. Succession: You fulfill the dream of early retirement and pass your ISP business on to your children or other family members.
2. Sale: You elect to get out while the getting is good by selling your private ISP as an ongoing business operation, or exiting your publicly held business by selling all or most of your stock.
3. Liquidation: You opt to get some return on the business while there's still a chance by dissolving the business and selling its assets.
4. Depletion: You have no choice by to declare bankruptcy and fold your ISP operation. Rarely does anyone choose to exit a business in such a manner. But, if all else fails and you must exit the business, planned egression could make your forced exit a little less painful — at least financially.

Pass it on
Rarely does the owner of any business plan for succession, in happens by default. Remember, barely 30 percent of family-owned businesses survive into the second generation and fewer than 15 percent endure into the third.

Whether or not you can afford it, you should hire professionals to advise you about wills, trusts, insurance and estate planning in the early stages of your ISP business development.

Placing a portion of your ISP business into a trust may eliminate succession squabbles. Making gifts of stock in a fledgling business to family members can mean passing ownership on to the next generation — without gift tax consequences.

Sellout
Exiting your ISP business by selling out also requires financial planning, at least if you want to exit on the best possible terms. Your position as a partner in a partnership, shareholder in an incorporated business, officer of a publicly traded company, or guarantor of the operation's loans, will have either a legal or moral impact on your exit strategy.

In a perfect world, you'd plan to sell when the economy is booming, when the industry is at its peak and when your ISP business is having a banner year with the future looking highly profitable. That's the time when you would be the most likely to receive the best possible price for your business. In reality, however, your decision to sell will probably have more to do with your personal circumstance, rather than exiting at the apex of your ISP's performance.

Balancing your personal life with operating an ISP is a challenge. Utilize a professional financial planner to help you decide when the time is right for your departure on a financial level and seek counsel with family and friends to balance your decision on a personal level. It may not be the optimum moment to exit your ISP business on both counts, but you may ultimately achieve harmony between your dual priorities.

Clear off
Few ISP owners anticipate the circumstances where they will exit their operation by liquidating the business. But in far too many cases, you are your business — you and you alone are responsible for the success or failure of your Internet service.

Without you, without your name recognition, your unique skills, or your local connections, there may be no business worth operating. If you leave, regardless of the strategy chosen, the business will cease to function. In this case, the business consists of you, your skills and some assets.

Fortunately, planning your exit strategies can easily encompass the liquidation of its assets. Planning to improve those assets, in fact, can benefit other areas of your exit strategy planning. A professional third party can make all the difference in result of your decision to liquidate your business. Get some help from a liquidation specialist to protect your best interests.

Escape through the nearest door
No one wants to fail and no one plans to fail. From the start of your Internet business venture, your exit strategies should include the unthinkable — bankruptcy.

Planning with failure as a contingency may mean moving assets from your ISP business into a separate entity altogether in order to avoid claims by creditors.

It may mean that you complete a loan with the business demanding payment, rather than having them accept your I.O.U. When a company declares bankruptcy, there is a pecking order among your creditors. The owner of a failed ISP often finds their unsecured claims at the bottom of the pau-off pile, while secured debt stands atop of the heap.

Regardless of who you owe how much, now is the time to prepare a contingency plan for exiting your Internet service operation via bankruptcy protection — but anticipate that you'll never have to execute the plan.

Exit right
The primary goal of any exit strategy should always be to leave at a time when you think that you will be ready. Departure should always be done on terms that you dictate. If that is not possible, at least you should make your exit with a plan in hand.

Your legal complications, moral ramifications and personal obligations all factor in to how you exit your ISP business. Commitments to partners, investors, or fellow-shareholders and the key position that you occupy as an integral part of the business are factors you will need to consider when you plan your exit strategies.

Even under adverse conditions a good exit strategy is one that will allow you to remove yourself from the ISP operation with your goals intact — be it cash rich, continuity planned, sanity maintained, or simply with your teeth.

A bad exit strategy is when you do not plan for your departure. Don't allow all your hard work to go for naught because you didn't think about how to exit your Internet service. Set a few goals today and start to plan your ISP exit strategies right now. You'll be glad you did.

— End

     

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	[June 1, 1999]	Top 7 Things To Do Before You Sell Your ISP