Building Your Exit Strategy

When starting a small business, oftentimes an exit strategy is the last thing on your mind. However, every business plan should include an exit strategy to better prepare for the future.

Beyond creating a roadmap for your small business, an exit strategy is something that every investor in a small business looks for. From an investor’s standpoint, an exit strategy provides a way to cash out on an investment.[1]

Regardless of whether you plan to leave the business in five years or in 25 years, it’s as important to know how you want to leave as it is to know when you want to leave. Because of that, every business exit strategy should have certain benchmarks that must be achieved. This will help ensure that you are fully prepared to leave the business and will also ensure that the business is going to continue thriving once you are gone.

While many of these benchmarks are financial, some are more about the overall structure of your business. Here’s a look at three considerations that should be part of your exit strategy.

Your Role

As a small business owner, you’ve poured a lot of yourself into this business. But in order for your business to continue flourishing in someone else’s hands, you will have to eventually minimize your involvement. This means giving staff members more authority and autonomy to make decisions. Learning to delegate big decisions can be difficult for an entrepreneur, but it’s crucial in order for you to fulfill your exit strategy plans. Work toward having a minimal role with procedures in place so that someone else can step in and run your business.[2]

The Path to Building Value

Not only do investors look at how a company will gain value but understanding that path to value will help you outline your plan for success. Identify what milestones need to be reached in order to build your business’ valuation, then develop a detailed and measurable plan for reaching those milestones.[1]

Streamline Financial Functions

Clean, dependable financial records are crucial for potential buyers, but they also help make your daily operations easier. Up-to-date records allow you to better follow your business’ fluctuations and know exactly where you stand at any given time. Financial functions like accounting, accounts payable and payroll should be streamlined for efficiency. Not only does this make you more attractive to an investor or buyer, but it makes your operations much easier.[2]

Consider working with your bank to create financial processes that are streamlined for efficiency and designed for both your success and your business succession.

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Important Legal Disclosures and Information

  1. “7 Steps to Formulating a Successful Exit Strategy,” VentureWell, https://venturewell.org/exit-strategy/, Aug. 8. 2017

  2. “9 pro tips for your business exit strategy,” Xero.com, https://www.xero.com/us/resources/small-business-guides/business-management/small-business-exit-strategy/, downloaded March 24, 2018

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