Do you have an exit strategy?
If you started your business some time ago, the answer to this question should be a resounding ‘Yes’. Even if you are the leader of a new business, you should at least be able to say that you have begun designing your exit strategy.
Exit strategies for startups include a plan of action if you sell your business or decide to move on. It aims to maximise returns by determining the most profitable way to end the venture while minimising losses and risks. Exit strategies typically involve selling all or part of the business, liquidating assets, winding down operations, and closing the business. Different exit strategies include Initial Public Offerings (IPO), Mergers and Acquisitions, Leveraged Buyouts (LBOs), and Strategic Alliances.
When designing an exit strategy, you must consider your personal objectives, market conditions, and the industry’s foreseeable future. For these reasons, I recommend building your exit strategy while your business is still young; here are four reasons:
1. A good exit strategy already takes years to refine
You cannot develop a robust exit strategy overnight. It is a process that takes careful consideration and planning over the years to ensure it will succeed in the long run. You will need to consider myriad factors such as financial objectives, tax implications, legal and regulatory issues, personal goals and family considerations. It can also involve a detailed review of the current market, industry trends and potential buyers.
Developing an exit strategy may take years, depending on your business’ size and complexity. The process requires you to consult with experts such as lawyers, accountants and financial advisors to ensure that all aspects of your strategy are in order. With the right preparation, you can ensure a successful transition when it is time for you to move on.
2. You get a picture of the business’ worth and can maximise profitability
Planning your exit strategy from the business’ early stages can give you a realistic picture of its worth. You might envision your business as worth quite a bit. However, its worth will change depending on the market and the buyer. When crafting your exit strategy, it is best practice to consult with experts who understand the buying landscape, can analyse your business and provide an objective estimate of how much the business will be worth when you decide to sell.
Leveraging this information can be an excellent way to maximise profitability. When you have a goal in mind for how much you would like to sell the business, you can target problems that minimise your return further down the line. When working with advisors, they will share their insights on what directions may not work for the business and where you need to improve.
3. It gives you time to ensure the business can operate without you
If you were to step away from your business tomorrow, how confident would you feel about it running without you? One problem many business owners and entrepreneurs face is stepping away from the business and letting it run without them. Part of crafting a successful exit is ensuring that your business will run after you have sold it.
You may not feel like this step is important during the early days when you do not plan on going anywhere, but life happens; there will be times when you need to take a step back. This part of your exit strategy gives you peace of mind knowing that your hard work and investments will endure if something unexpected happens.
When you have ensured that your business can run without you, it also means that your team can grow and succeed even when you are not involved.
4. You and your team have a focus to work towards
Designing an exit strategy in the early days gives you a goal to work towards and guides your team on the trajectory of the business. When you know by when and how much you would like to sell the business, you can leverage your exit strategy to guide the business’ overall strategy. It becomes a guideline for making important decisions, such as deciding whether to invest in a new product or service.
You should regularly review and update your plans as the industry landscape changes. Regularly assessing the progress towards exit goals keeps your team accountable, clarifies what needs to happen next to achieve them, and ensures that they remain focused on reaching the end goal.
Conclusion
Designing an exit strategy in the early days of a B2B startup is essential because it provides clarity and focus. An end goal provides a foundation for decision-making and allows you to invest strategically in projects that will yield long-term rewards. An exit plan also makes it easier to attract investors, who are often more interested in backing businesses with a clear path to profitability.
Resonate can guide your exit strategy
I help B2B business leaders define or refine their strategies. I advise leaders on how to prepare an exit strategy. I also provide strategic advice and consulting on various facets of strategy; business strategy, corporate strategy, product/service strategy, functional strategy, go-to-market, competitive strategy, pricing strategy, etc.
If you are starting a new role as a business leader, or you have been with the business for a while, and you need to craft your exit strategy, let’s connect, let’s talk. I have extensive experience in guiding business leaders on exit strategies. I look forward to hearing from you.
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