Destination: Exit! Why an Exit Strategy is Important

Imagine you are planning a trip. What is likely the first thing you’d decide on? If you said destination, then you are exactly right! In most cases, when we plan a trip, we know what our destination or purpose of the trip is. Maybe we want to go to the Smoky Mountains? Or hike up a mountain to see ancient ruins? Whatever the end-game may be, it is what drives all the decisions we need to make leading up to it. It is what tells us where we are going, so that we can figure out how to get there, and how to make it happen.

An exit strategy is like having a destination for a road trip you want to take. Without a destination, you can’t plan a route, and you lack a goal to measure the success of the trip against. The exit strategy is for the business owner and is their plan on how and when they will leave their company. It becomes what guides you in the decisions you make for your company because you essentially are building up your company to a place where you can initiate this exit plan and ultimately leave it.

“But wait, what if I never want to leave my company?” you may ask. To which my response would be, “are you immortal?” When I talk to my clients about exit strategies, I don’t care if their plan is to work until they die on the shop floor. I mean, I do care. My hope is that they don’t work themselves to death! However, if that truly is your plan, that is still an exit strategy. To which we then have to determine what should happen to your business after you die. Where do your clients or products go? Is your hope that a family member will take over? Do you want it to be profitable enough that your family can sell it and make some money? Do you want it to just dissolve, and your clients move on to another company for services? Or are all your remaining products donated or thrown away?

As you can see, even if “death” is your exit strategy, there are still many questions that need to be answered! And as morbid as that example is, it’s the example I like to give to people who think it’s not important to have an exit strategy. Or who mistakenly think they’ll never leave their company. Because the truth is, we will all leave our companies at one point or another. So if we are all destined to exit our companies, we might as well plan that exit on OUR terms, rather than the economy or mother nature. And roping back to our road trip example, if you know what your destination (aka, exit strategy) is, then you can plan your route on how to get there. What steps need to be in place before you leave? If you have 20 years to work with, then great! That means you have more time to implement those steps. However, if you want to retire in just a few years because your business is heavy manual labor and your body is falling apart, you will have a lot more to get done in a shorter period of time.

Your homework: If you have an exit strategy, great! Then your homework is to take a little time to review it and determine if you are on track with that plan or need to make adjustments. If you currently don’t have an exit strategy, then you have a bit more homework to do. I want you to take a few minutes to write down your exit strategy. It doesn’t have to be complicated. You don’t have to map out your entire road map on how you’ll get there. But you do need to write down the when and how of someday leaving your company. Below are some examples to get you started. Choose one from below and expand on it to make it personal, or write a completely different one.

Example 1: I will sell my company when it reaches a gross profit of $1 million in the next 10 years. Example 2: I will train a family member in the business and pass it on to them when I retire in the year 20XX. Example 3: When I die or retire, my company will dissolve and not be sold or passed on to anyone. The executive of my estate will alert my clients if I’ve passed away so they know to find another service provider. Example 4: After 5 years of running my business, I will continue to own it but will step back and hire someone to run the day-to-day operations. I will draw dividends off the profit and use my free time to pursue other business ventures. After another 10 years, I will sell it with the intent of first offering it to an employee before selling it on the market.

In a future post, we will dive into how to use your new exit strategy to create your roadmap on how to get there!

Feeling a bit lost?

If you are realizing that you’ve been blindly leading your business with no destination in mind and want to get on track, it’s time to take action.  Schedule a chat and see how leveraging our bookkeeping and business advisory services can build a roadmap for your success.

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