Why You Need An Exit Strategy / by Kerri
Your business exit is not a death sentence. It should be the ticket to your next venture, adventure, avocation or simply the joy and fun of retirement. Here are just five reasons why you need an exit strategy.
- Plan B – Every business owner needs a Plan B. You always have options and contingencies in mind for business decisions and opportunities to consider. When it comes to what you do ‘next’ after this business, you need options too. Plan B could be as simple as closing up shop and walking away when you get tired of the business. Plan B could be what you’ll do next when your hands, your eyes or your legs won’t let you do any more of what you’ve been doing for the last 20 or 30 years. Plan B could be the fulfillment of every promise you made and every dream you’ve had over the last few decades. If you don’t have Plan B, you are in denial.
- Plan Ahead – Every CEO is busy in their business, keeping it going, growing, and thriving. CEOs care about their customers, clients, staff as well as their outside support team, investors and others. But when you stay focused on today, tactics, and to-do’s, then your view of the world is narrow and shortsighted. As the CEO, it’s your job, nobody else’s, to look at the long-term goals and direction of the company, the future of the company and the security of your team. The CEO has the strategic responsibility to plan ahead. Own it and everyone will benefit. Ignore it or deny it, and your business will drift with no rudder. When you acknowledge your mortality and plan ahead for your exit, you ensure both your legacy and your dynasty will carry on.
- Contingencies – There are business contingencies and there are owner/leader contingencies. As the CEO, you need both in place. Emergencies happen. We have no control over the weather, fire, flood, or earthquake. How will your business continue in spite of/around outside disasters? You need contingencies built in for the short-term or long-term loss of a key team member – do you and your staff know what to do in case someone breaks a leg or quits for health reasons? You need to document a process and a plan for how to proceed so the business doesn’t miss a step. Most importantly, do you have contingencies in place so that if you must get out of the business, the business can continue? Have you made you irrelevant to day-to-day operations? These contingency plans reduce risk and add value to the business. They provide the terms and parameters for how you can indeed exit the business while preserving your legacy and dynasty.
- Security – Your business is likely our most valuable asset – and yet it’s also probably the most illiquid asset you own. Therefore, while you are working, drawing a paycheck from the business, it is providing security. But as soon as you can’t or choose not to continue in the role of CEO, what does that do to your financial security, especially long-term. You need to start building your exit strategy now so this business you’ve invested so much blood, sweat and tears into will indeed provide for the security of financial independence which you need when you exit. Setting up and implementing this one element can take years.
- Build Wealth – The biggest mistakes almost all CEOs make in both large and very small businesses, is that they settle into building a business that provides only an income stream. They never set up the business to be a wealth-producing machine. They get to the point where they want to exit and there’s nothing there that can be monetized anywhere near the value they think it’s worth. Their wealth is so tied into the business; they can’t leave with the financial independence they dreamed of. There is a solution.
With an exit strategy in mind all along the way, then every day-to-day decision is tied to the strategic long-term goal of a specific exit strategy. When you focus on a wealth-producing strategy, the income stream will be there.