Why Creating an Exit Strategy is a Must Before You Think of Leaving Your Company
Why is it that some people are successful in selling their businesses while others just close up shop and walk away leaving their equity and goodwill on the table?
An exit strategy is usually the last thing you think about when you are first starting your business. You’re in it for the long run with visions of major growth in the common years, so why waste your time?
The truth is that many businesses don’t continue into the far future. Sometimes business owners may need to move on if things aren’t working out. If this time comes and you have something of value, you should be able to pass it on to someone else and pocket some cash at the same time. This is what an exit strategy is for.
I started a home based business called The Organic Basket Company back in 2001. I aspired to be able to grow this business into a coffee shop model, to make it into a franchise and have stores all over and retail gift baskets in many locations.
Then the daily grind settled in. Although the business was generating about $30,000.00 a year (with me only working one weekend a month), the work became boring and lacked challenge and dynamism.
I wanted to hire on a team member to help me out and keep it going but my profit margins weren’t large enough for me to pay an employee and keep some of the profit for myself.
In 2006, I opened Parlez Wireless, an Authorized TELUS Dealership. The basket business continued to exist but I was now completely focused on this new endeavour.
While I was growing Parlez Wireless with my husband, the basket business dried up. I ended up selling it for a very small amount of money which was just enough to cover the cost of the products that I had on hand.
In 2012, I sold Parlez Wireless. This time things were different.
Two years before Parlez Wireless sold, I had begun my consulting business. At the time there was a team who could operate the business without me and the business was not declining the way the basket business did.
Even though it was running successfully without me, inside I knew this was not what I aspired to do in the long term. This is when I started making plans to exit the company.
This time I sold the inventory I had on hand and walked with actual money for the equity I had built in the business.
In addition, the business had solid operating systems, sales tracking, and cash-flow tools. The business was profitable and a new owner wouldn’t have to put a lot of time and money into it. These appealing qualities allowed me to sell the business at a price I was comfortable with.
What made the difference between the experience and outcome in selling the two businesses? I learned three valuable lessons from my first time around selling The Organic Basket Company, and I wasn’t going to make the same mistakes twice.
• When you lose your interest in your business, your sales will go down and your profit will deteriorate.
• The moment you feel you are not as jazzed with your business as you once were, start to think about whether or not you should consider an exit.
• Always exit at the top of the game, not after your sales have slid to the bottom.
Selling your business does not mean selling out. Businesses can come into your life for a season or a lifetime and you get to make the choice of how long you hold onto it.
Just because you may not feel the interest anymore does not mean that someone else wouldn’t be thrilled to continue to build up momentum from where you left off. Build something really great and sell it when the value is still there.