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As a business owner, you should always be thinking about your next move. In some cases, that’s your exit strategy. Even if it’s not your exact next move, an exit strategy for small business is something you should always be keeping in mind.
What will become of your business once you’re no longer involved, and how will you come out on top? There are various options for a small business owner when they are ready to exit—and many reasons for that exit.
See below for a guide on the best way to plan for your business’s future and the many ways you can successfully move on or transition from your business.
First things first.
Photo by Al x on Unsplash. Planning your exit strategy doesn’t mean planning for failure.
An exit strategy is simply a plan for what will happen when you want to leave your business. It describes and outlines the form that the transition will take. That’s it!
Your exit strategy doesn’t have to mean disaster or failure, or even imminent action—in fact, many business owners start their business with the express purpose of exiting after X number of years. It doesn’t mean they are less committed entrepreneurs. It just means they are realistic.
There are infinite reasons to want to plan an exit strategy for small business, and 99.99% of them aren’t bad reasons. They include a planned exit, retirement, health problems, change of interests, an unexpected offer, a new venture, needing to raise money, wanting to spend more time with family or take care of a loved one.
Leaving at the right time for you can often be the best decision for your business in the long run—no business is better off with a leader who can’t or doesn’t want to invest the time and effort to run it.
The best kind of exit strategy is the one that’s exactly right for you and your business—and, perhaps just as importantly, is planned well in advance. When you’re just starting out as a business owner, it’s easy to think only of your business’s growth and future success, but it’s important to be pragmatic from the very start.
Exit strategies are not a negative. In fact, “the best reason for an exit strategy is to plan how to optimize a good situation, rather than get out of a bad one,” says Business Insider. “You don’t wait til you are in trouble to think about an exit. Rather think of it as a succession plan, or a successful transition.”
This thinking makes it so you can focus on efforts that will eventually lead to the appropriate ends you want for your business.
When you’re just starting your business and life is starry-eyed with promise, this question might seem almost offensive. But, again, it’s important to be realistic when planning an exit strategy for small business. Even if you spend your entire career owning the same business, most people eventually plan to retire at a certain age. Have you set up your business to make that a possibility in the way you’d like to down the line?
Maybe you know that you can only withstand business ownership for up to 10 years—in your eyes, what would you ideally like to happen? Would you still want to be involved in the business even if you weren’t the owner?
These are important questions to answer for yourself and make the appropriate plans. It might even be a good idea to evaluate how you feel about these questions year over year, as your life and plans evolve.
This, of course, is different for everyone. As much as you might love the concept of your business or the good it’s doing the world, almost every entrepreneur has financial needs and goals playing into their business plans (unfortunately, almost 70% of entrepreneurs don’t regularly save for retirement). Whatever your goals may be, this question will greatly play into your exit strategy outcome.
Many business owners work with consultants or professionals to help them make the best decisions, but it’s helpful to ask yourself the above two questions first when planning an exit strategy for small business.
John Leonotti over at QuickBooks lays out the following advice: “The planning starts with determining your personal and business goals, and then assessing your mental and financial readiness. After that, you need to identify the exit options that are most aligned with your goals and readiness.”
At that point, you need to attend to “the executable items, such as taxes, deal structure,” and so on. You also need to understand the full value of your company to understand what your options might be.
In short, it’s all about crystallizing your goals to make the best decision for your business at the appropriate time of exit. For more information, the Small Business Administration also has a comprehensive guide.
If your exit is in the immediate future, you need to choose one plan and stick with it. But if you have the time to plan ahead, it’s a good idea to set yourself up for multiple options. Fortunately, you’ve got numerous exit strategy options to choose from when thinking about the future of your business.
See our guide below.
Even while you’re starting your business, you should be thinking about your ideal exit strategy. Hopefully, this article gets you started planning your exit strategy for small business.