If you are a small business owner, chances are you have heard of the term "exit strategy." Usually occupied by managing daily operations, entrepreneurs tend to overlook the importance of an exit strategy and postpone planning it. As one of the top small business lenders in Atlanta, we believe that having a harvest goal in mind and developing a plan to achieve it is what sets truly successful entrepreneurs from others. That's the reason why we have come up with this article - to help you fully understand the significance of an exit strategy and why you need one for your business.
What's an Exit Strategy?
An exit strategy is what you plan for your business when you don't run it anymore. To some people, it sounds negative. "If you are running a successful business, why bother thinking about the end of it?" This is actually a wrong approach since there are so many external factors that can affect your company in the future, including government policies, the economy, technology, etc. Without proper exit planning, you may find yourself struggling to achieve your end goals down the road. Think about it this way - by developing an exit plan, you are optimizing your business for a good outcome, rather than trying to get out of a bad situation.
To formulate a successful exit strategy, ask yourself these questions:
- How much longer do I want to stay actively involved with the business?
- By selling the business, will I have the financial independence that I need to move on to the next phase of my life (a new venture, retirement, etc.)?
- Who will be my successor?
- Realistically, how much is my business worth?
Why Do You Need an Exit Strategy?
Appeal to Investors
In case you need funding for your business, one of the things that investors will look at is the exit strategy section in your business plan. It reflects your level of commitment to building a high-growth venture as well as whether the investor(s) can get a good return out of your venture. At First Liberty, we work closely with entrepreneurs to make sure that their exit strategy is smart and viable so that they can secure the capital that they need.
Direction Guide for Your Company
A large part of an exit strategy is envisioning what you want your business to look like at the end of the road. With clear end goals for your business in mind, you will feel motivated to align your operational strategies with these goals to eventually achieve them. When facing a tough business situation, you can reflect on the goals that you listed in your exit strategy to make the right decision for your company.
Leverage in Negotiation
When buyers looking to acquire your company, they will try to get as high a return on their investment as possible. With an exit strategy in place, you will know exactly the value of your company as well as the goals you want to achieve when selling your business. These serve as leverages at the negotiation table and allow you to get the most out of your venture when you are ready to move on from it.
First Liberty - Your Trusted Small Business Lenders
Having been in business since 1993, we have always advised entrepreneurs to develop an exit strategy as soon as possible. At First Liberty, we cannot stress enough how appealing a business with a clear exit strategy is to investors. Therefore, make sure that you have one n place and keep it updated as your business grows.