A business plan is valuable, but just as important is an exit strategy. This is a matter for some real thought and planning before you begin on the first page of your business plan. You may be wondering why it is important to think about an exit strategy for a business you’re just launching. The short answer it that without a plan for an exit, your business decisions can get biased by your own interests, not those of your customers. This, in turn, will make it much harder for you to build and sustain a truly valuable business. An exit strategy is one that forecasts the flow of cash from the business at various future points and when it will no longer be needed.
As a new entrepreneur you’re potentially not thinking about an exit strategy. I mean, it’s your business and you’re expecting it to flourish and possibly retire you, right? Yes, that is a great possibility. However, realistic thinking projects that there may be a point when you may consider exiting your very own business. Some people go into business with the thought of selling it on their mind, while others get to a point in their lives where the business no longer suits them. It’s one of those things that will become apparent only as you begin to do business. As you reach milestones in your life, business and as you grow as an individual, you may just want to transition into another industry or simply do something else – or not. Whatever happens in the future, a great exit strategy will have you more than prepared in those instances.
5 SMART EXIT STRATEGIES
What happens when you’ve reached a point in your business endeavors where you’re just not happy or satisfied anymore as an entrepreneur? What happens when you desire to rebrand and take on another business adventure? As an entrepreneur what happens when you’re ready to call it quits and exit your business? Do you have an exit strategy in place?
There are 5 smart exit strategies that you can consider and put into your exit strategy. The most common is Merger & Acquisition (M&A). This means margining with a similar company or being bought by a larger company.
Bobbi Brown of Bobbi Brown Cosmetics started out with 10 lipstick colors as a freelance makeup artist and turned it into a billion-dollar business. She had built this prestigious cosmetics business and eventually sold it in 1995 along with her very own name to Estee Lauder. Why on earth would anyone want to take a prospering business built from the ground up and walk away from it allowing someone else to acquire it? Well in Bobbi Brown’s case, she wanted to spend more time with her husband and children. It was that simple.
She felt she had reached her growth potential. When presented with a sale price, she went for it and became an employee at a business she birthed. This freed up Bobbi’s time and after a few years with the company, she walked away from it. For Bobbi Brown Cosmetics this M&A was a very profitable one for her and didn’t stop her dreams for having her very own cosmetics line. After her non-compete time was up, she launched another cosmetics line, Jones Road Beauty.
1. Merger & Acquisition (M&A)
2. Initial Public Offering
3. Sell to an Individual
4. Use it as a Cash Cow
5. Liquidate & Walk Away
Initial Public Offering (IPO) was once a preferred method for entrepreneurs. Shares are offered and investors can participate in the offerings as well. Entrepreneurs can also plan to sell to an individual and cash out of the business allowing someone else to run and operate the business. This can also be done if you’ve reached a level financially where you can have someone operate the business without you selling it. The income will become a sort of cash cow extra stream in this case. The last exit strategy is to liquidate everything in the business and close the doors.
QUESTIONS TO ASK YOURSELF
Be sure you have your exit plans in place by asking yourself a few questions. When will you exit your business? Thinking about the 5 smart exit strategies, what is your strategy? What is your transition plan? How will you communicate to your clients, employees, and vendors that you’re transitioning out of the company? Will you have any input regarding business during the transition? Is your business currently structured for a transition? Will your core values be upheld in the future? Lastly, you should ask yourself what will you do after your transition?
It may be a daunting task to sit down and think about an exit strategy for your business, especially if you’re just launching or starting up. The most important thing to remember is to consider all possibilities now and plan for them because you never know where your business will take you. One day you could look up and be presented with an offer to sale your business for millions.