Beginning With the End in Mind… The Importance of Having an Exit strategy
With the excitement of starting a new business, it’s easy to overlook the fact that one day, it may no longer fit into the current makings of your life. In fact, when someone brings up “exit strategy,” it’s normal to be confused. Why would I be planning an exit before I’ve even started? As counterintuitive as it may seem, having an exit strategy or a contingency plan that can be put into effect when necessary will help alleviate some of the hardships that come with taking the risky leap that is entrepreneurship.
The importance of having a solid plan in place when you start your business is an essential aspect of the entrepreneurial process. There are lots of “exit strategies” to consider when starting your business—everything from mergers/acquisitions to simply closing the doors and liquidating—and it’s important to check out all of your options to decide which one is right for you and your business.
Here are the top 3 exit strategies:
- Merger/Acquisition: combining your business with another or selling your business to another person, company, or entity.
- Closing the business: involves liquidation of assets and closing the doors of your business.
- Succession planning: this applies to a family business, and is a preparation for passing a business down to another member.
With those in mind, we’d also like to offer a few basic tips for considering an exit strategy for your venture:
Set a timeline. A popular choice for this is to reassess your business every six months. Ask yourself if your business is reaching the goals you had in mind. Take an in-depth look at the ways you’re succeeding or failing. Figure out if your business is still relevant in the ever-changing landscape of entrepreneurship, consumerism, etc. If things are where you hand planned they would be, great – then continue and review again in six months. If not, it’s time to reevaluate the plan, adjust and make some decisions.
Don’t take it personally. No matter how it plays out. For example, if someone approaches you with interest in an acquisition, try not to be too proud that you blow them off. If this option can give you a better end result, then it’s probably a smart option for you to consider. It’s hard to put feelings aside sometimes, but realize that an exit strategy is for the benefit of you and your business. You can always negotiate options that work for both parties. And, if you’re not sure, contact one of our staff members for guidance.
Know your business. The ins and outs of it. Its valuation. Get familiar with your venture, with your team. It’s easy to get lost in day-to-day operations and forget the simple answers to questions that will likely come up in an exit opportunity. Again, these seem like simple things, but when it comes time to exit, having these details stored in your mind (or even better, written down), will only streamline the process.
Deciding on an exit strategy might feel a little heavy, especially in the beginning stages of developing your business, but the planning that comes along with it is essential in creating an easy departure or next step in your venture. Whether you’re looking to retire, to try out a different venture, or to simply get out of an undesirable situation, starting a business with your end game in mind is an important part of the process.
If you have questions about exit strategies or need help deciding which option might be for you, don’t hesitate to contact us today!