Why it is Important to Have an Exit Strategy in Place

A business exit strategy is an incredibly important aspect of business planning. Contrary to popular belief, having an exit strategy isn’t pessimistic, in fact, it’s good business etiquette. There are many benefits to knowing how you will exit your business when the time comes, but many business owners don’t consider their exit strategy until it is much too late.

If you’re wondering what a business exit strategy is and how it could benefit you, you have come to the right place. In this article, we’re going to cover all of this and more. Take a look below to find out the facts.

What is a Business Exit Strategy?

A business exit strategy is essentially the plan you have in place to liquidate the business and sell it to investors or another company in the industry. It can be used in the case of retirement, to make a profit on your business, or when you feel it is time to move on.

In most cases, an exit strategy will allow you to make a substantial profit from your years of hard work. However, it can also help you to recoup any losses if you’re business has begun to flounder.

Your business exit strategy should be fluid, meaning it should change as the business grows and develops. You should have a plan in place early on so that you are not caught without one when you suddenly need it.

Advantages of Having an Exit Strategy in Place

There are many advantages to having a business exit strategy in place which we have examined below.

It Gives You Control

Having a business exit strategy in place gives you control over how and when to sell your business. If you are running a successful business, you are likely to receive unsolicited offers to purchase your business now and then. Many of these offers don’t benefit you as they should, so knowing your business’s worth means you can navigate these offers more easily.

You Can Develop Your Business in the Right Way

Alongside your overall business strategy, your exit strategy can help to determine your goals and aims with your business. It can help you to move your business in the right direction and achieve all you want with your business before you bow out.

Knowing how something will end is a really easy way of cultivating the right strategies. You can use your exit strategy to seek out your weaknesses and work on them before it’s too late. 

While having your exit plan in place can be helpful, it is also important not to get too bogged down in the details. If you find that your business is developing in a way that doesn’t work with your current exit strategy, you can rearrange the exit plan to suit the new direction of your business. Remember your exit plan should be fluid!

It Covers You in the Event of the Unexpected

Sometimes, we very unexpectedly have to close down operations due to the sudden death or disability of key players in the business. In these cases, it can become very overwhelming trying to deal with liquidating the business, but if you already have a plan in place, you’ve done half the job already.

You Can Make Your Business More Appealing to Potential Buyers

Believe it or not, showing potential buyers that you already have an exit plan can make you more appealing to them. It shows you have a clear direction for your business that you have planned for well in advance. 

It also makes you a much more committed seller. Many buyers will have had experience with hesitant sellers who back out at the last minute, but an exit strategy can make you more trustworthy in the eyes of a buyer.

You’ll Have Your Documents in Order

One of the biggest hassles that people encounter when selling their business is having all of the paperwork in order. But, if you have had an exit plan in place for years, you’ll be aware of what documents you need to sell your business quickly.

It Can mentally Prepare You to Exit

Your business is like your baby, and when you have been working on it for years, putting time and money into developing it, letting it go can be incredibly difficult. An exit plan, derived early on, with goals and aims for your business can give you a checklist of things to achieve before you exit. 

If you have achieved everything you wanted to achieve with your business, an exit plan can be an efficient way to cut ties with your business, knowing you have done everything you set out to do.

Types of Exit Strategies to Consider

There are many ways you can exit your business in a clean and efficient way. Below are some of the different types of business exit strategies you could consider.

A Merger or Acquisition Deal

These are common among startups and are essentially just selling your business to another company. This company may want to expand its geographical footprint or just acquire your talent. Whatever the reason, big companies will pay to buy your business from you.

This is a good option if you want to maintain control over the price at which you sell, and competition for your business could force the price up even higher.

Selling to a Partner or Investor

Selling your stake in the business to a partner or an investor means it stays in friendly hands. It is likely that the person you sell to is trusted and already emotionally invested in the future of the business. This is a great option if you don’t like the idea of a stranger taking over operations.

Management and Employee Buyouts

In this scenario, you would give members of your management team the option to move into leadership roles by buying you out. In theory, your management team already knows the business back to front, meaning you are leaving it in good hands and with someone you already trust.

Liquidation

Although rarely planned for, some businesses fail and use what is known as liquidation to recoup any costs they can. Liquidation means selling off all the business assets and any of the money that is earned goes towards paying off debts and your shareholders.

Liquidation is a very firm end to the business and is a much quicker process than any other kind of exit strategy.

Your exit strategy is an important part of your overall business strategy and it can offer you security and peace of mind. You should create your exit strategy as soon as possible and let it inform your business practices to move your company in the right direction.

Eden Exchange offers a platform for businesses that are looking to sell and is a one-stop shop for those looking for a smooth and easy selling process. Our revolutionary platform hosts a range of active buyers looking to invest in established businesses and we could have your business acquired and in good hands in no time. To find out more about how Eden Exchange works and how it could help you, get in touch today.

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Eden Exchange is an integrated multi-channel platform, simplifying business buying and selling. We match, refer and connect business buyers, sellers & brokers in an ecosystem that facilitates frictionless franchise, business and finance transactions. Visit www.EdenExchange.com and connect with our engaged and multidimensional transaction network today.