Posts tagged with: business exit strategy
I repeat, you must have a business exit strategy. It’s not optional.
Without an exit strategy, you may get stuck in a quagmire – where you can’t get out of your business. Why would you intentionally allow yourself to get into that predicament?
At its worst, an exit strategy will help you save face instead of closing the doors and walking away with nothing. At its best, your chosen exit strategy will tie your transition to the achievement of a specific objective worth more to you than the cost of continuing on as CEO.
When you do decide it’s time to move on and you want to ‘cash in’ on the successful prosperous business you’ve worked years to build, here are few steps you can take immediately to get started on your exit strategy:
- There is tremendous pressure associated with every step in the sale of a business. Make time to work on the strategic side instead of focusing exclusively on the tactical/operational side.
- To prepare for the sale, start thinking about it early: ideally 2-5 years before you intend to walk away.
- Put yourself in the buyers’ shoes. Recognize what they want, what they need, what they’ll ask for and what they’re looking for.
- Don’t even consider doing this alone. Loners can tell you the best stories about their failures but you don’t need to be one of them. Instead, assemble an integrated team of professionals. An exit strategist can become the virtual partner who facilitates your team of licensed experts to produce a cohesive exit solution.
- Make sure your financials are ‘clean’ and your projections are sound. You want everything in order well before the sale date.
- Prepare the business before you get a professional valuation to enhance the value of the business. This will strengthen your negotiating position with prospective buyers. The analogy is that to sell a home you de-clutter and make it spotless to get the best price, which takes time. The same is true, even more so, for your business.
- Get educated on the process of ‘selling a business’. There are many elements, many options, and many players. You want to be in control of the process.
Many CEOs believe the mythology that they can make the decision and exit the business less than 6 months later. In practicality, it takes 2-5 years for a CEO to fully exit their business.
If you try to rush it, you face many risks and consequences that are avoidable:
- You reduce your choices
- You eliminate strategic options to grow (top line, bottom line, etc)
- You minimize the value you can get
- You don’t have enough time to think through the integration of personal, professional and business goals
- You may not be satisfied with hastily chosen results
- You may not prepare staff and successors enough for an optimal transfer and transition
- You may not be able to prepare adequately for the tax consequences of your decisions
- You may not be happy with the outcome even if it is on your accelerated timeline
Tame your exit strategy. Start early. Plan ahead
“Most traders never plan or even discuss their Forex exit strategy. “
In the world of Forex trading, that’s what Pete Visconti says. In his world, traders pay more attention to their entry, setting up a good trade and timing profits. They forget or don’t look at the cost of not having a Forex exit strategy for each trade too.
As Visconti learned the hard way himself:
“Although, traders will argue which is more important,
you need to understand that they both are.
Just make sure they are planned and part of your trade plan.”
Analogous to his advice for traders to have a Forex Exit Strategy, here are my four points for Entrepreneurs/CEOs to plan your business exit strategy before you plan your market entry:
- Know What Your Business Exit Strategy Will Be BEFORE You Launch Your Business.
If you are in business and didn’t do this up front, you are already behind. It’s already harder for you to make good clear decisions about your business day to day, because you don’t know what your exit options are; what you are aiming for.
Therefore, if you don’t have an exit strategy in place, put exit planning on your critical exit strategy, path now to increase the value of your business at exit – whenever that may be.
- Consider Multiple Exit Strategies
When you lock down your exit strategy too soon, you eliminate the possibility of alternative opportunities providing even better solutions. When you maximize the number and variety of options on the table; you have more choices, more opportunities, and can make better decisions along the way
The sooner you start exploring alternatives open to you, the more control and more choices you can position you and your business to benefit from. The longer you wait and the smaller your exit window, the fewer options you can consider and reducing the value you can realize at closing.
- Always Initiate a ‘Stop Loss’ as Part of Your Exit Strategy
In the context of your business exit strategy, a ‘Stop-Loss’ is a contingency plan if things go awry and you must get out fast.
You have an emergency exit from the building. You have a backup of your hard drive offsite. You also need a plan for other crisis scenarios.
It could be an insurance policy, a backup successor, a backup exit plan that is not ideal, but fulfills many of your criteria and can be invoked quickly. It’s like having a co-signer on a key bank account or having a second key holder for your lockbox.
- Stick to Your Business Exit Strategy just as Conscientiously as Your Business Strategy
One of the biggest obstacles business owners face is getting distracted by the ‘new shiny object’. They get restless or bored working the sound strategy they are implementing and decide to shake things up without any stopgaps to protect them or the business. That lack of discipline can cost you your retirement and the business in the end. Revise it strategically if necessary. It’s in your best interest to trust your exit strategy and follow it with discipline.
Most entrepreneurs will skip these elements of laying out their business. Most CEOs will trivialize the importance of their exit plan in building the success of the business.
The flaw in that thinking is that business is all about making a profit.
Planning your business exit strategy from the outset is an imperative to achieve your goals for the business. Consequently, your daily decisions all lead to how much profit you achieve and what you want to do with the resulting profits.