Strategies for Exiting Your Business

A business owner who starts their venture may create five-year plans that seek to drive profits and sales. Also, business owners desire to achieve growth, taking their business from one level of success to the next. However, it is essential to create an exit strategy if things do not go according to the plan. Not only is this a plan that will guide business operations, but it is also a fail-safe to ensure that the business is never caught off guard in case of any operational challenges. The earlier in the life of the business, the easier the transition will be when it is necessary.

An exit strategy is vital to ensure that the company has the right revenue models and legal structure. Furthermore, it provides direction on investment, especially when looking at short and long-term growth goals and the types of investors that would be beneficial to the business. In the heat of the moment, putting together an exit strategy with tight time restraints may result in gaps that cost the business owner dearly. A logical and well-thought-out plan will ensure that there is minimal loss and that investments of all stakeholders are well protected.

To create the exit strategy, a finance professional like an accountant should be at the forefront of the draft plan. This finance professional should coordinate their work with a business attorney so that all due process is followed. Together, they will create the initial draft. Additional information can be added in from key managers and members of an exit strategy advisory committee. With all these contributions, it becomes possible to have a highly comprehensive document that can be updated when necessary.

Many people opt to write a will to ensure proper division of their assets should they pass away. This does not mean that they are planning to die. In fact, it is viewed as something highly responsible to do. It is similar to creating a business exit strategy. It does not speak to the commitment of the entrepreneur. It is merely a readiness tool to prepare for any eventuality.

There is something worth considering when creating an exit strategy, and that is how to react and respond to an unexpected offer by large companies who may be seeking an acquisition. This helps ensure that the business owner has some insight and can guide a negotiation well if a buyer is available. Sometimes exit is not voluntary, and even in this situation, significant benefits can be realized.

Future research should seek to analyze an actual exit strategy, seeking insights and opinions from all stakeholders. These should help to determine the planning phase effectiveness, those involved in the process, and the end result. Carrying out these end to end studies will help with understanding which processes are the most effective from start to finish. Furthermore, it will become easier to identify loopholes that may cause an interruption to executing an exit strategy.