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Entrepreneurship burnout is real. A recent study from Small Biz Silver Lining confirms that 75% of small business owners are concerned about their mental health. The thrill of being your own boss and having complete control over decision-making can often wind up being the very thing that causes the stress. For entrepreneurs who have scaled their business to include a substantial operating budget, clients and staff, the decision to step down or sell a business outright can feel overwhelming.
While selling might seem like the most straightforward option, it’s not always the best fit for every situation. Fortunately, there are several alternatives to consider that provide flexible solutions tailored to your specific needs and goals. In this article, we’ll explore five alternatives to help entrepreneurs alleviate some of the stressors of business ownership.
Related: How to Spot Entrepreneurial Burnout (Before It’s Too Late)
1. Succession planning
Rather than selling your business to an external buyer, you might consider passing the torch to a successor from within your organization. Succession planning involves identifying and grooming a capable individual, whether a family member, a trusted employee or a partner, to take over the reins of your business. This approach allows for a smoother transition of ownership, as the successor is likely already familiar with the company’s operations, culture and clientele. This route provides an opportunity to preserve your legacy and ensure continuity for employees and stakeholders. However, succession planning requires careful preparation, open communication and a commitment to mentorship and training to set the successor up for success.
2. Exploring partnerships and joint ventures
Another alternative to selling your business outright is to explore partnerships or joint ventures with other businesses or investors. Collaborating with strategic partners can offer access to additional resources, expertise and market opportunities while retaining a stake in the business. Whether it’s a joint marketing initiative, a co-branded product line or a shared distribution network, partnerships can help drive growth and diversification without relinquishing full ownership. However, it’s essential to enter into partnerships with clear agreements and shared goals to ensure alignment and mitigate potential conflicts down the line.
3. Franchising your business model
Franchising presents a viable alternative for entrepreneurs looking to expand their business without shouldering the full weight of ownership. Of course, this will not apply to all businesses; restaurants, gyms, travel, automotive and home repair businesses are well suited for franchising. By franchising your business model, you can grant individuals or groups the right to operate under your brand name and business model in exchange for franchise fees and royalties. Franchising offers scalability and rapid expansion potential while leveraging the efforts and investments of franchisees. It also allows you to maintain control over brand standards and quality assurance while tapping into new markets and territories.
However, franchising requires careful planning, legal compliance, and ongoing support to ensure consistency and success across multiple locations. One of our clients is the CEO of a major gym across the United States. He has used franchising as a way to 10x the business. In fact, while the Bureau of Labor Statistics reports that 20% of independent businesses close after two years, FranNet found that 92% of franchisees were still going strong after two years.
4. Transitioning to employee ownership
Transitioning ownership to your employees through an Employee Stock Ownership Plan (ESOP) is another alternative worth considering. ESOPs enable employees to acquire ownership shares in the company, typically through a trust, providing them with a vested interest in the business’s success. This approach fosters a sense of ownership, loyalty and alignment of interests among employees while providing a viable exit strategy for the owner. ESOPs offer tax advantages for both the business and its employees and can be structured to facilitate gradual ownership transition over time. According to NCEO, the median job tenure of employee-owners is 5.1 years, 46% more than for those without an ESOP. However, implementing an ESOP requires a lot of planning and the company needs a consistent cash flow. Not a lot of companies go this route yet, with the right company, it has tremendous benefits.
5. Diversifying revenue streams
Diversifying your revenue streams and building passive income streams can provide ongoing financial stability and flexibility. This could involve expanding into complementary markets or industries, developing new products or services or investing in income-generating assets such as real estate or stocks. Building passive income streams can provide additional financial security while allowing you to retain ownership and control of your business. One of our clients had the opportunity to buy a building next to theirs. He got it at a reasonable price, converted it to a storage facility and provided an excellent alternative cash flow to the company.
Founders today have many options to alleviate the stress of entrepreneurship. Exploring alternatives such as succession planning, partnerships, franchising, employee ownership and passive income can provide viable alternatives tailored to your unique circumstances and objectives. Each alternative comes with its own benefits, challenges and considerations, so it’s essential to weigh your options carefully and seek professional advice when necessary. By considering these alternatives, you can make an informed decision that aligns with your long-term goals and aspirations for yourself and your business.