You need a business exit strategy. If you don’t have one, develop one. The closer you get to exiting your business, the more you need a plan to do it. But even if you’re just starting out in business, you still need an exit strategy. If you don’t see the need for an exit strategy or if you believe it’s too early to worry about an exit strategy, please read below. I’ll try to convince you otherwise.
Whatever the task, conventional wisdom says you should start with the end in mind, and so it is with business. What do you want to achieve with your business? World domination? Or maybe a more modest goal of creating a business that will provide for your retirement? Maybe you have an idea for a new product that you want to develop and then sell to a big company for a boatload of cash. Whatever your end game is, it’s unlikely you’ll get there without an exit plan. Even if your business is relatively new and you don’t see yourself leaving it for another 20 years, you still need a business exit strategy. Twenty years gives you a nice long runway to complete your business plan with time to course correct along the way as needed.
For most small business owners, the business is their single largest asset and the one they depend upon for the financial security of their family. So doesn’t it make sense to understand how that asset is valued and how that value can grow? And when you’re making critical, strategic decisions, doesn’t it make sense to know that the decision you’re about to make will increase the value of your business and not detract from it? Obviously, it does, and that requires a business plan.
Creating a Sensible Business Exit Strategy
A business exit strategy doesn’t have to be enormously detailed . . . particularly if time is on your side. However, you should have a general idea about how you intend to ultimately leave the business and what sort of payday you need to support the lifestyle you want once the business is behind you. An exit plan to hold onto the business as a “cash cow” that will continue to pay you in retirement will look very different than an exit strategy to sell the business outright to a competitor. Or maybe you intend to get all the cash you need out of the business before you retire then when the day arrives, you turn off the lights, put out the cat, lock the doors, and walk away. That exit plan will look entirely different than any plan to sell the business. The point is, if you leave it to fate to determine when, how, and for what price you exit your business, you probably won’t like the choices fate gives you.
By the way, I’ve had people tell me that their plan is to exit their business feet first and horizontally. That may work for you if you have no dependents (family or employees) to leave behind, but for the rest of us? Not really an option.
It’s tragic to spend years building a business only to find out that you can’t leave it the way you intended and that the market won’t pay the price for it you had expected. So do the smart thing and decide now how you expect to exit the business and put together a sensible business exit strategy to do that. If you don’t know how to do that or where to start, call me. I can help with business consulting and more.