The phrase "exit strategy" sounds final, as though you've decided to sell your business tomorrow. But, for most of us, this strategy is not only about where we want to be in 5 years or 20 years. It's really about planning for financial success when we are ready to sell. If you have a target in mind, you'll be focused on maximizing profits and building your future.

Dreaming of being financially secure or preparing for being financially secure – it's the same concept, but one works and the other doesn't.

Reasons for preparing an exit strategy

Surprises happen. Many of us have a story of an associate who had to sell their business unexpectedly. The reason could be an accident or a serious health finding. Or, it could be the buy-out offer of a lifetime from your manager, a colleague, or enterprising entrepreneur. Having an exit strategy in place enables you to perform when the unexpected happens.

Plans to sell your company should be made at the time you start to build it. If you have a target in mind, you'll be focused on maximizing profits and building a future.

Success or surprise?

In every business, many things demand attention. If you don't have a plan, it's easy to spend the whole day – the whole year – attending to the most pressing problems, instead of preparing. Once prepared, when an unanticipated opportunity presents itself, you can give it careful consideration. You will realize fair market value because you will have done all the good steps I'm going to outline.

Ten critical things you need to know about exit strategies:

1. Decide where you want to be in 5 years, 10 years, 20 years.
2. Make sure your employees know your goals or growth and change.
3. Stay flexible, and have a backup plan because business, life and goals change.
4. Update your business plan, and make sure it includes an exit strategy.
5. Keep your financials current, and have them audited yearly. It adds to their value.
6. Put together a team of experts, including a CPA, an attorney and a financial advisor or other expert for valuing your business and intellectual property.
7. Run the company every day as if it were going to be sold.
8. A mistake is thinking that it will be easier getting out than it was getting in.
9. Prepare a "selling your company" file and checklist for monthly/annual reviews to keep on track to meet your goals.
10. Attempting to sell your business on short notice means that you are not in control of the sale.

If you don't have a plan, it's easy to spend the whole day – the whole year – attending to the most pressing problems instead of following a business plan.

Over the coming year, your plans certainly will change, the unexpected will happen. But having an annual plan will help you figure out what things you absolutely need to do – as well as keep you from feeling lost.

Selling your business on short notice or simply closing the doors, are the simplest options, and the ones with the least financial reward. But that can happen if your official or more likely your unofficial exit strategy is to manage your business until you wake up one morning and say, "Forget it! I can't do this any more." At that point, you can start looking for an exit and take whatever you can get.

Unfortunately, that will probably be a great deal less than if you strategize while you are still enthusiastic about the business.

Published: February 2, 2004

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