Don’t make the mistake of not planning your exit well in advance. An exit strategy is crucial to all investors in a small business because it’s reassurance that the business is on track to achieve its long-term goals. It’s also your indication of how much money you can make.
Should I have written my exit plan already?
If you are setting up a new business or are an early stage start-up, you should already know your long-term goals, including your most likely business exit strategy. This may be planning ahead, but a clear understanding of where you’d like to be and how you’re going to get there is expected and will dictate how you run the business.
What should an exit strategy include?
A good exit plan will map out how you can achieve a sound financial future for your business whilst meeting your own personal and financial goals too. Key points to consider include:
- Defining the ideal outcome – what do you want to achieve?
- Making sure your plans maximise the potential value
- Setting a target exit date – when do you plan to leave?
- Giving yourself enough time to execute the strategy
- Building in the flexibility for your plan to evolve
How do I prepare to exit?
Although you plan your exit well in advance, there are steps to take that will make it happen. And exit strategies will shift as the business grows, so take the time to review and amend regularly.
Key steps to take when preparing to exit include:
- Don’t assume that someone will want to buy your business. You need to identify potential buyers and create a target list over time.
- Ensure your revenue stream is consistent and sustainable. Where possible, set up channels of automatic recurring revenue to demonstrate stability and good growth.
- Create a set of standard operating procedures that details the day-to-day running of your business across all functions. You need to prove it can work without you.
- Build a strong management team that is focussed on the future. Putting in place attractive retention packages could be advisable to support this.
You will also need to consider whether your business is successful because of you and, if so, remove yourself over time to reduce the dependency and increase the value. A business reliant upon its owner is less appealing to investors.