What’s Your Exit Plan?

business Feb 28, 2018

Last but not Least

When it comes to business planning the first thing on our minds usually isn’t an exit plan.  In fact, sometimes that doesn’t even get into the business plan at all.  Having an exit plan is very important.  It may not be the fun part of planning your empire but it’s absolutely necessary.

If you don’t plan for the end you may get caught by surprise and find yourself scrambling.  The end of a business (regardless of the reason) is not a time to be scrambling.  

The Trigger Event

An exit plan is usually triggered by an event.  When you start your business, you may identify what that trigger event is right away.  It could be something like a specific age.  Maybe you want to retire at 65, that would be a trigger event for your exit plan.  Perhaps you want to run the business for 10 years and that’s it, that’s another example of a trigger event.  

The event could also be goal driven.  Once you achieve a certain level of sales or profit, or the business has a specific value, that could trigger your exit plan.  The reverse also might be true, if a certain level of debt has been reached or a certain number of months where you’ve incurred a loss, you may decide that’s a trigger event.

There are also times when other people may trigger the exit plan.  If you are in partnership and one person wants to leave the business.  Maybe you are a Franchisee and the Franchisor makes a decision that triggers your exit plan.

The first thing to do when writing an exit plan is to look at what your trigger events might be.  Notice that’s plural?  There may be a few different events that could happen with your business so it’s important to explore them all.

Determine the Who & the How

Every exit plan will have a “how” and most will have a “who”.  Let’s say you hit a trigger event like a sales goal or 10 years in business, how do you want to exit?  Is your plan to sell the business?  Bring on a partner to take on more of the workload and transition them into full ownership?  How does that look?  Who would you need to make it happen?  Keep in mind that an exit plan can take some time so you may have to start recruiting years in advance to groom someone to take over your business.  If you are planning to sell it, that will also take time and preparation. 

If you are in partnership, having a clear idea of how everything would be handled if one (or both) of you wanted out of the business is important.  It’s not always just financial, there could be Client lists that need to be discussed, conversations about what the person leaving is going to do moving forward (non-compete).  If a partnership has gone sideways these are really difficult conversations so it’s best to have them in advance.

A business can end or close for many different reasons.  When you take the time to get clear about what that may look like for you at the beginning it will influence all of your decisions moving forward.

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