When is the best time to layout your exit strategy?
Surprisingly enough the best advice is: Plan your exit before you start!
Starting a business is a lot of work but it ought to be fun. It’s a world of learning as you try to build something new and make it work.
Many people are so caught up in the process that they don’t really consider where they want it to go in the long-run. Only a handful of entrepreneurs are forward thinking enough to plan the finish – their exit strategy.
It might sound weird but it is a critical part of your planning. There have to be a day when you need to walk away from the business. There might be dozens of reason for that. Business circumstances change, you want or need to move, family issues, retirement, or you simply want to do something different. But when you know where you want your business to go, you are more likely to make the right decisions at the exit point.
Planning an exit strategy is about deciding what you want out of your creation and then executing it. If you know from day one that your ultimate goal is to sell your business to your staff, then that is going to affect the kind of people you hire and how you develop them. If you want to run your business from the beginning to the end, then you can spend the final few years squeezing every drop of profit and cashing in assets.
Most certainly, things might change over time. It’s sensible to put your exit strategy in your business plan and review it regularly. That way you can ensure the business is on track to achieve what you really need from it.
It is true that you cannot start planning your exit early enough but it is also true that it is never to late to write the plan. If you are already running your a business and don’t have a plan to get out, it’s time to write one now.
What are the exit options?
- Passing the business on to the family: This is an attractive option when the owner has worked long and hard building up a business, and wants to see the family continue to benefit.
- Selling the business: This is the most common exit option. The business can be sold as a trade sale to an outsider, or to your own staff (often called a management buy-out).
- Merger: This can be a good way of ensuring your hard work continues after the owner’s exit.
- Floating the business: This is only an option for businesses that have significant revenues and it is a costly exercise to go public.
Shutting down business: Unfortunately this is the most common route where small and medium businesses end. If this is something you want to avoid, plan your exit from day one.
Exit plans widely vary by depth and details. Just like any other times, the more elaborate plane you have the easier the implementation becomes. We suggest start-up businesses to come up with a simple plan and making a habit out of revisiting and fine-tuning the plan regularly over time.
Whether your business is at an early stage of its life cycle or you are getting close to part with it, we are here to help you to create a roadmap which helps you to maximize the benefits and minimize the risks of the process.