Before you start your new business, think about your exit strategy.
Planning a new start-up puts you in an exciting frame of mind that’s all about creating new beginnings. When you’re just starting out, thinking about the end is probably the last thing on your mind.
What you need to realise is that a good business plan is a long-term plan, with both a start and a finish. By planning your business exit strategy before you begin, your journey will be more rewarding, and your business better equipped to deal with future challenges.
Most people simply don’t contemplate exiting the business when they’re just getting started, or even after they’re well established. Most business owners figure the end is a long way off, and anything could happen before then. But it’s these unpredictable happenings that make having a business exit plan in place even more important.
Think of planning a start-up like planning a holiday
Imagine you’ve just been given the opportunity to take a holiday to your dream destination. You could just fly out with the loosest of plans and see how things work out. After all, you’re headed to where you’ve always wanted to go. In all likelihood, you’ll have a great time.
But, particularly if you only have limited time, you might see this type of travel as too risky, and instead make plans and preparations beforehand. Typically, you’d research the best time to go, where to stay, how much to budget and whether you’ll need to organise things like annual leave, vaccinations, insurance, passports and visas.
Paying attention to these details before you go usually results in safer, more affordable and more fulfilling travel. You’ll be better equipped to prevent sickness and contend with the local climate and culture. Without planning before you leave, you’re more likely to have problems with getting around, accommodation, access to sites and attractions, or paying more than you needed to because you didn’t check any pricing. On your return home, you might be left wondering if you could have done things better.
Begin with the end in mind
7 Habits of Highly Effective People author Dr Stephen Covey encourages us to “begin with the end in mind”.
This is a philosophy worth applying when making long-term plans for your business and identifying and assessing possible events that may affect your business into the future.
It’s essential you consider what might happen to the future of your business when faced with scenarios such as:
· Deciding to retire
· You or your staff no longer being capable of the work required of them
· An accident which prevents you or another important member of your team from working
· The loss of a major customer
· Changes in the business landscape or the advent of a disruptor who reinvents the industry and makes yours no longer viable
· Government legislation changes the way your business operates in a restrictive or prohibitive way, reducing sales and/or profit
· Family conflict requires the business to be sold or divided
Too often, people fall into the trap of thinking that as long as profits are on the up, an exit strategy isn’t worthy of immediate concern. Good profits now, however, can be a disguise for future problems.
“Every decision you make today must be aligned to your exit” - Tom McAlister
By carefully planning what business needs to look like in case the need to exit arises quickly, the exit price you can achieve will be higher, the speed at which you can exit faster, the process easier to manage, and the outcome more in accordance with your goals.
More importantly, if you design your business to maximise the exit price, the options available to you and the speed at which you can sell, you will have designed a business that each year will provide:
· Better profit
· Better clients
· More sales of the kind you want most
· Reduced obsolescence of stock and sales products
· Reduced industry and market risk
· Stronger cash flow
· Greater systematisation (things continue to work well when you’re not there)
· Stronger brand or company recognition
· Higher value
· Freedom to enjoy what really matters to you
· Less stress, and more time to take that holiday you’ve always wanted to
When planning a start-up, you increase your business’ chance of surviving and thriving by implementing a long-term plan for success. Having an exit strategy doesn’t mean being fearful your business will fail. In fact, it’s the exact opposite. By determining when and how you exit your business, at the price you need, you’re taking an essential step towards creating a secure, successful long-term venture, with greater rewards and freedoms when the time to bow out eventually and inevitably comes.
No matter what stage your business is at, planning your exit is an important part of your overall business strategy. Talk to a Pretium Solutions Advisor who can help you plan an exit that starts benefitting your business today - not just in the distant future.