In this week’s newsletter, I wrote about the importance of creating an exit strategy for your business. (If you’re not on my mailing list yet, sign up). It’s one of the strategies that a lot of entrepreneurs overlook. They’re so busy building, launching, and scaling their businesses, that they don’t take any time to think about what they’ll do if they ever want or need to leave their business.
Some people think that creating an exit strategy isn’t important because they plan to run their business long-term. Other people feel like it’s something they can worry about when the time comes. But your exit strategy should be something you think about from the time you first start to plan your business.
Your exit strategy shouldn’t be an afterthought or a last-minute decision.
Let me break it down for you with a military metaphor. When I was in the army as an infantryman, we would sometimes go on missions where we’d have to get to a certain destination or target. My superiors would come up with a mission plan. The plan would include what our target was and how we were going to get to it to execute the mission objective.
It works the same way in business. Your business plan is like the mission plan. You first have to figure out what your targets are. That’s things like revenue, locations, market share, and staffing. Your business plan should also include the steps you’re going to take to hit those targets. That’s your marketing, PR, and content strategies and your product and service development.
But the one element that’s missing is the exit strategy. No military mission starts without a strategy for exfiltration. If we make a plan to go in, we also create a plan to get out. This makes sure we don’t get stuck in a dangerous position once we’ve accomplished our objective.
You should do the same for your business because you may reach a point where you need to walk away. You might want to retire, go after other opportunities, or pass the business on to a successor. You may need to step away from your business because you or somebody in your family is sick. Or, in the worst-case scenario of your unexpected death, you’ll want to have something in place to make sure your family, your staff, and your business are covered.
Even if you don’t imagine leaving your business for a long time, it’s smart to have an exit strategy.
When you create an exit strategy, it gives you a roadmap for your entire business. That clarity is key. When you know where your business is going long-term, you can build a company structure and the systems you know you need to get there. For example, the company structure you’ll need if you’re building a family business looks completely different from the structure you have to build if you want to list your business on the stock market in the future.
The clarity of an exit strategy also helps you make the right decisions as you scale your business. What kinds of teams do you need to hire if you’re planning to build multiple brick-and-mortar businesses in different locations? Which processes do you need if you’re hoping to run an international e-commerce business? What will you need to do if you want your children to inherit and run your business one day?
Having an exit strategy for your long-term vision makes sure you invest in the right things and people instead of wasting time, money, and energy on resources that don’t align with your goals.
Ultimately, creating an exit strategy gives you the freedom to control the path your business takes. This means that you can run your business instead of your business running you. I assume you didn’t start your business just for someone else to call the shots. That’s why an exit strategy is important. It lets you decide where you want to live, when you want to retire, who runs your business when you’re away, who gets to make decisions about your brand, how your family will benefit from the legacy you’re building, and more.
Now you know you know why you need to plan your exit, here are three ways you can start creating your exit strategy:
Set your goals and reverse engineer your plan
Grab a pen and a notebook and write down your ultimate goals for your business in the next 10-20 years. Think about whether you want to:
- Sell your business to a major corporation for millions of dollars
- Expand to multiple locations and franchise them out
- Hire a CEO to run the business while you pursue other goals
- Pass down the business to your children or a family member
- Liquidate your business and use the profit to retire or start something new
- List your business on the stock market and sell shares to the public
How soon do you want to achieve these goals? What will it cost? How much will you need to earn? Don’t focus on being ‘realistic’ when you answer these questions; ask yourself what you really want.
Once you have answers to those questions, you can use a modified 3-2-1 plan to reverse engineer a path to that goal. Set your biggest goal for the timeline you chose. Then figure out what you would need to do to achieve half of that goal in half the time (so if you want to sell for $15 million in 10 years, you need to make your business worth $7.5 million in 5 years). Then, repeat that process again, cutting your goal and timeline in half (with our last example, that’s $3.75 million valuation in 2.5 years).
You can use this same strategy for any goal and any timeline to create a strategic path for your exit goals.
Talk to a pro about getting your money in order
When it comes to business, there are a lot of things you can DIY, but you should be getting professional advice on your accounting. Messing up on money matters can completely tank your business. So, if you want to achieve exit goals like selling your business, expanding locations, or taking your company public, you need to understand the ins and outs of the finances.
Talking to an accountant can help you figure out things like what your budget should look like; what you can and can’t afford to invest in; and what kinds of loans you can go after. They’ll also make sure all your financial details are up-to-date and in line with the law, including things like taxes, stock market listing, investors, and financial statements.
Build strategies to set your business up for success
Your business isn’t going to succeed if you’re just fumbling around with no strategy to attract the right customers and keep them spending with you over and over again. No matter what kind of exit you want, you need to build a core story that makes your business impossible for people to resist.
Corporations don’t acquire or merge with businesses that don’t have a loyal customer base to bring in revenue. You can’t successfully expand into new markets or locations unless you have what it takes to build a clientele in those spaces. And you don’t want to hand your children a business that doesn’t have the kind of brand recognition it takes to be profitable for generations.
Whatever your exit goals, you need to build a business that people are going to care about and connect to. The best way to do that is with a core story that sets you apart from the competition, attracts your ideal customer, and builds the brand loyalty and high-earning potential of successful brands. To do this, you’ll need an arsenal of strategic tools for marketing, PR, and content that will make your brand appealing to customers, investors, and buyers.
Creating an exit strategy isn’t easy. It takes a lot of time and honest reflection to figure out what you’re going to do with your business years down the road. But it’s an important step to make sure you’re not just shooting in the dark with your business. The effort of developing an exit strategy is worth it to get the clarity you need to take strategic steps towards your long-term business goals.
But taking the steps is the most important part. Once you have everything in place for your exit strategy—what you want to achieve, what it’s going to cost to do it, and the strategies you’re going to use—you’ve got to start making consistent moves towards it every day. That’s the only way to accomplish the mission.
Have questions about exit strategies or other business practices? Looking for resources and tools to help you get your business off the ground? Want to network with other entrepreneurs? Join my No Sympathy Fam facebook group to access all the business tools and resources my team and I use and trust.