When you start a business, it's all about passion and excitement. You burn the candle at both ends. You put in the hard work of planning to make sure you set up your company for success. The last thing you want to think about is getting out of the business. But that's a mistake. If you don't have an exit strategy, you could create a new set of problems.
What Is an Exit Strategy?
An exit strategy is an end game for a business. It's the ultimate goal of being in business. But if you don't plan ahead, it could be something you will plan for in panic mode which is never good. You might not want to think about selling or otherwise getting out of your business now, but maybe you'll feel differently in five years. Additionally, if your business doesn't flourish as much as you expected, a well thought-out exit strategy could mitigate potential losses and prevent you from ending up in serious financial debt.
Types of Exit Strategies
If you're ready to pull up your personal stake in the business, you have numerous options.
You could sell the business to another company, an individual, or a manager. If you start a business with someone else, one partner might want to leave, while the other wishes to stay. Alternatively, you might want to keep your business in the family and sell to a relative or a group of long-term employees. You could also position your company for acquisition by a large corporation. If you grow your business to $100MM and you think it could one day become a billion-dollar company, then you could also take your company public on the New York Stock Exchange. That which means preparing an IPO or initial public offering. It's a long and somewhat costly process, but going public gives you access to cash and elevates your brand to a new level.
Often if you don't create a plan for your business future, a good situation such as a purchase offer or the worst-case scenario, like closing the business, could cause havoc. If you lose your largest customer, you might need to liquidate or go bankrupt to save your personal assets. When you are forced to sell your company to pay off business debt, you may or may not have any profits left over to keep.
Why Do You Need an Exit Strategy?
Your business's goals and plans aren't etched in hundred-year-old marble. You can have multiple strategies that lead you in different directions.
For instance, a strategy that helps you build clientele, boost cash flow, and build brand recognition could allow you to stay in business for the rest of your working life. Alternatively, you could use those advantages to sell your business for a hefty profit.
Without an exit strategy, you have no alternative other than staying with the business and succeeding. Since you don't have complete control over either of those outcomes, you need a plan in case you need to take another course of action.
A wise small business strategy requires you to prepare for every potential situation. What if a competitor suddenly garners 90 percent of the market share in your industry? What if you fall ill and can no longer handle the requirement of running a business? Nobody wants to think about those possibilities, but I encourage you to do so. The best small business advice I can give is to give yourself as many potential paths as possible. To learn more about running a successful business (with a viable exit strategy), join a smallbizchat every Wed 8pm ET live on Twitter. I'd love to connect and answer your small business questions.