Why Planning Your Exit Strategy Is Important
There is plenty of advice and information available on building a successful business, but less often talked about is how to leave it behind. There are many reasons why people want to leave the job or business they have. Maybe it’s a shift in the corporate culture that’s leaving feelings of uneasiness for you. Or, maybe the business has run its course and you don’t have the passion for it like when you were starting out as a business owner. Whatever the reason you want to exit, it’s always best to have a plan for it.
There are two types of people in the world – reactive and proactive. Reactive people take action based on emotions and circumstances that can be very limiting. On the other hand, proactive people will create situations they want by planning ahead of time. A proactive person is more likely to have developed an exit strategy because they’ve decided their goals and set things in motion to achieve them.
One of the most important decisions a business owner or executive can make is envisioning their exit strategy. Even if you don’t plan on leaving any time soon, it’s worth thinking through your exit option and having a strategy in place.
Here are three factors to consider when creating an exit strategy.
Decide on an exit option
There are many variations of exit options for business owners and executives. Some of the most common include: transfer of ownership to heirs; sale to a partner or employee; IPO; acquisition and merger. Remember that, no matter what option you choose, the objective of exit planning is to determine how a business can maximize its value. An exit plan prepares an organization for the worst while it plans for taking the business forward. Exit plans are a complicated process, which demands serious planning and continuous review in order to ensure you are on the right track.
Develop your exit strategy
Once you’ve decided on your exit option, you can take that a step further and begin to develop your strategy for reading. The best exit strategies are ones that fit your business and personal goals. By developing your exit strategy you will have a clear, concise plan to step aside when the time is right. The benefits of planning an exit strategy far outweigh cost of not planning one at all. Without a plan, you may be forced to sell at a far lower value. A planned exit strategy also allow you to create a smooth transition while generating income for retirement and enhancing the future worth of your business.
When to exit
The best reason to leave a business is to optimize a good situation, rather than to get out of a bad one. Because positioning your business for a good exit can take upwards of five years, it’s important to review any current and potential deficiencies. Putting a timeframe on your exit will give you time to fix any and all issues that may have slipped through the cracks. Using the timeframe you’ve put in place as the barometer, you will be able to really think through your exit. Do not wait until you’re in trouble think about your exit strategy; instead, think of the best way you can make a successful transition when the time comes.
An exit strategy does need to be difficult or time consuming, but it will save you a ton of pain when it does come time to move on from your business. If you would like to some help planning your exit strategy, contact me for a free business analysis.