Article 43: What’s Your Exit Strategy?
Now here is a topic very few people every want to discuss and even fewer have ever put on paper - the dreaded business exit strategy. Ideally this would have been thought out and identified in the business proposal stage. However, who wants to discuss dissolution before you ever get started? Many will use the argument that you are speaking defeat over your business before you even start. Confessing things which you know would never happen, right?
Well I have news for everyone, sometimes bad things happen to good plans. Now most businesses have a business plan, some more detailed than others but regardless of the content I have yet to read one that includes an exit strategy. The reason is very simple, everyone wants to think positive and any possible conversation about the other end of the spectrum is consider taboo and bad MOJO. The truth of the matter is everyone needs to consider all possible outcomes so they have a clear idea, at any given time, what the plan allows for and the steps needed to either correct or terminate. We need to know what extremes and sacrifices we are willing to make and for how long.
We have all heard stories about the newly successful entrepreneur who inevitably makes this statement to the media, “I had $3.00 in my wallet, no bank account, drained my 401K, credit cards were maxed out, house had 2nd and 3rd mortgages and I was about to become homeless when all of a sudden I got my one lucky break and now I’m a multi-millionaire”. I’m very happy for that guy but my guess is IF he had an exit strategy it was that he was all in even if that meant living on the streets and going to soup kitchens for the next 20 years. The truth of the matter is the world is filled with the other 99.9% of people who chose that same strategy and didn’t get that lucky break. It’s these people that I’m specifically addressing.
In the beginning when the business is just getting started and even though it is a lot of work getting it off the ground, spirits are usually high, expectations soaring and the only idea which typically comes into a business owners head is “What will I do with all this money I’m going to make?” But after about 6-8 weeks when all of the initial efforts have been exhausted, revenue is little to non-existent than scrambling starts to take over. New plans are hatched, marketing efforts adjusted and stage 2 of a good business plan is being worked. Then stage 3, 4, and so on until 12 to 18 months later circumstances have not greatly improved and revenue projections are not hitting their marks that reality starts to set in and the question becomes, “What are we going to do now?”
Here is the problem with waiting until this point to start developing possible exit strategies. You are already way to emotionally invested in the company, your personal accounts have been taking hits, you’re probably sleep deprived, physically you are not at your best and now you are trying to make sound, logical, life decisions on whether you should go forward or call it quits.
Regardless of which direction you go none of the decisions are going to be easy because you never put strategic exit strategy identifiers in place. The exit plan would have allowed you to take difficult circumstances and apply a formula which would direct you on what to do next, similar to using a cake recipe to make a cake. Without a sound exit strategy, upfront, you are almost destined to become one of the 99.9% of people who have mortgaged their future based on past/current decisions and experiencing the avoidable downward spiral.
I have good news! It doesn’t have to be that way. Take time out now no matter what stage of the business cycle you are in and create multiple imaginary lines in the sand regarding what you are willing to sacrifice based on possible upcoming economic events. Create identifiers with your finances, revenue, expenses, etc. Write it out and make it plain. It may not seem like a popular subject now but I guarantee you will assure yourself a much better outcome if you do it today, when you don’t need it, than trying to put something together when you do need it!
Jeffrey A. Mohr – Founder