Having an idea for a business is one thing and having a business exit strategy is another. Even if you have a great business idea, it’s unlikely that you can single-handedly execute it.
This is where the saying, “If you want something done, ask a busy person” comes in handy. You see, a lot of us are busy. Not just with our day-to-day lives, but also with our businesses.
We do all we can to achieve success. And if you’re reading this, you probably want to quit your job and start your own business. But, you’re also probably aware that it’s not easy.
You see, running your own business is a lot of hard work. Even if you have a great idea, you may not be able to execute it by yourself.
That’s why we’re here. We know how exhausting it can be to build a business from the ground up. And, if you don’t have any previous experience, it can be even more difficult.
Here is a guide on how to create a business exit strategy.
What is a Business exit strategy?
A business exit strategy is a plan for selling or closing your business after you’ve achieved your financial goals. Your goals could be to generate enough income to pay your bills, pay off your mortgage, or fund your retirement.
A business exit strategy is not the same as a liquidation strategy. You hope to sell everything you own at a knockdown price with a liquidation strategy. However, it would help if you still had an exit strategy if the liquidation strategy did not work out.
It consists of finding a buyer for your business before closing it. However, an exit strategy can also include finding a way to exit your business on your terms.
The most important aspect of an exit strategy is working for you. Not every business owner wants to or should sell their business. Some businesses are meant to be inherited, while others are passed on.
Benefits of a business exit strategy
Importance
Having a succession plan in place can help prevent productivity losses that result from a senior leader leaving or taking a lesser role. When a senior leader leaves or reduces his role, transfers to a different position within the firm, or refuses to continue as before, disruption may occur.
Recruiting can be quite expensive and time-consuming, and a firm can save time and money by having a successor and a succession strategy in place. It can also help with future development by identifying skills that will be important in the future and training key leaders in those disciplines.
There are many benefits to developing an exit strategy. One of the most important is to know when to get out of your own way and when to give up on your dreams.
Benefits
Businesses can use succession planning to strategically recruit and develop leaders. By enhancing employees’ capacity to occupy senior roles, succession planning allows for greater employee development and career growth and helps to keep top talent.
Through succession planning, companies may build a strong workforce by attracting and retaining the finest workers, as well as by ensuring that skills and expertise are disseminated to other workers.
Managing talent
Senior management evaluates the company’s future goals, identifies the positions that will be needed to meet them, and develops employees who can fill those positions in the future.
Employees may be trained in the skills and abilities required to meet the company’s future needs in this approach. This strategy allows management to be certain that future leaders already fit into the company’s ethos, but it may be expensive and time-consuming.
Emerging CEO succession
Although boards hope to never need an emergency CEO succession plan, it is crucial that one exists.
Succession expert Beverly Behan advises that an emergency CEO succession plan should include the following: identifying key criteria for any interim leader and assessing potential candidates on a regular basis and taking into account the possibility of more than one top executive being lost in an emergency.
According to Rick Wartzman, writing for Bloomberg Businessweek, some CEOs avoid planning out of fear of competition, but the most successful businesses recognize the dangers of not having an emergency plan.
Family succession planning
According to Baylor University professor John Schoen, many family-run businesses fail to address succession and ownership transfer issues because they are difficult for families to discuss.
Because so many U.S. businesses are family-owned, succession planning is critical. Owners must invest more time in personal and professional development in order to maintain familial ties while also planning for business secession.
Deciding to sell or close your business: A tough decision
A common misconception is that you can only have one of these two options: Sell or Close. The truth is that you can have both. You can sell your business or you can close it.
The difference between the two is that a closing is a one-time event. It takes place at the end of a particular fiscal year. A sale, on the other hand, is a long-term transition.
A sale is when you are ready to leave your business behind and move on to other things. You may be planning to retire or start another business.
A closing is when you are preparing for something else. You are not necessarily retiring or starting another business.
Closing your business is different from selling it because you have not necessarily gone out of business.
You may be closing the doors of your business for the day, but you still hold out hope that one day you will open it again.
Steps to developing your exit plan
If you have decided it’s time to think about an exit strategy, it’s time to get serious.
It’s not enough to simply say that you will sell or close your business one day. You need to take concrete steps to make this a reality.
- A business exit strategy involves having a direction, you will be able to make business decisions that direct you toward your future business goals. With your business future in mind, you will be able to set goals that lead you toward your desired business outcomes.
- A business exit strategy involves in-depth financial analysis required to develop an exit strategy. Maintaining the values of your business is crucial to staying committed. This gives you a way to measure the value of your business and determine the best time to sell it.
- A business exit strategy can make your business more attractive to buyers because buyers will value businesses that are committed to their vision and goals.
- Having a sound business exit strategy approach when you exit your business can keep you from experiencing undesirable consequences, such as bankruptcy. Seeing through business and personal goals after exit are one approach to ensuring you accomplish what you set out to accomplish.
Here are the steps you need to take to develop your business exit strategy:
Determine if your business is the right one to give up. Does your product or service improve the lives of others? If so, you can probably sell it or give it to someone else. If, on the other hand, you are dealing with your own problems, such as solving a problem for yourself or helping others solve a problem, consider giving it to a charity.
Assess your value. What are you worth as an individual compared to your organization? This is important because you do not want to sell your business for less than it is actually worth. If you have large tax debts, consider giving up the business and paying off your debts.
Develop a financial plan. What do you need to run your business financially? How much do you need to earn to pay your bills? This includes your business expenses such as taxes, insurance, utilities, and other business-related bills. Also consider bills for yourself, such as your cell phone plan.
Gather documentation. What documents do you need to take with you when you sell or close your business? This could include contracts, financial documents, deeds, licenses, etc.
Secure your credit. When you are ready to sell or close your business, you need to make sure all your duckies are lined up. This means having a unique company name, business name, business address, and phone number for your business.
Delegate and outsource where you can
When you own your own business, it’s easy to feel like you have to do everything yourself. After all, no one can do your work for you, right? The truth is that you should not have to do everything yourself, and you should not have to do everything yourself.
Delegate as much as you can, and outsource the things you can not. That means you should look for opportunities to outsource non-core activities or tasks that do not require special skills.
For example, you might outsource legal research, administrative tasks, or marketing activities. By delegating and outsourcing, you free up time so you can focus on what you do best.
Wrapping up
As you can see, there are many business exit strategies to prepare to exit your business. The best way to prepare is by networking with other entrepreneurs, laying the groundwork for your exit, making decisions that prepare you for an exit, and delegating and outsourcing where you can.
You should also learn how to say goodbye to clients and colleagues, and practice doing so in a professional and heartfelt manner.