Yesterday I talked about the reasons for having an exit strategy. Now I’ll look at what you need to do to create one.
First, you need to identify your exit date. Obviously you’ll be doing things differently if you’re looking at exiting your business within five years than if you’re planning to continue working for another 20 years.
Next, look forward to your exit date and create a vision statement for your business; what do you want your business to look like when you are ready to leave? Remember, the more profitable your business, the more you will be able to sell it for.
Next, look for gaps between where you are now and where you’d like to be. Those gaps are good places to start.
One thing you should focus on is profitability. The Pareto principle, also known as the 80-20 rule tells us that 80 percent of your profit comes from 20 percent of your customers and/or products. You need to focus on eliminating unprofitable products and customers. If you’ve been running your business for some time, there may be products you’ve had since the beginning, but they may no longer be profitable. Don’t hang on to deadweight out of sentiment.
Next you need to look at creating systems: systems for leadership, marketing, finance and management. The key is to ensure the business can run well without you at the helm. The more you can remove yourself from being necessary to the success of the business, the more attractive your business will be to a prospective buyer.
Some owners will be able to look at their businesses objectively and create an exit strategy on their own. Others will need help to see the big picture. Getting help to go through this process can ensure you cover all your bases.
Whether you’re planning to leave in five years or 25, creating an exit strategy is a smart move. Not only will it increase the amount you’re likely to be able to sell your business for, but one you start implementing your plan, you’ll see increased profits along the way. And that’s what we all want.
Andrea J. Stenberg
