Starting a new business and having it take off is incredibly exciting.
But what about the long term?
Do you see yourself still running this particular business in five years?
Ten years? Twenty?
You might think you want to do this for the rest of your life, but stuff happens.
Sometimes things change unexpectedly.
You might find yourself wanting to pursue a different project, or you might just get kind of burned out after a few years.
You need to come up with an exit strategy ahead of time, so if the time comes that you want to move on, you won’t feel stranded without a clear plan.
A recent blog post from A Better Lemonade Stand explains why you need this kind of contingency plan in case you ever want to sell your company.
Why You Need an Exit Strategy
While right now it might seem like blasphemy to consider exiting your business, there are actually lots of reasons why you need to be making these plans right now.
Here are some of the most common:
LIFE THROWS YOU CURVEBALL
This is the obvious one. While you may think everything is going smoothly, you can never predict the future.
Some unexpected event can cause your market to implode or prevent your customers from being able to spend money—think of the Great Recession.
If this were to happen and you were caught without an exit strategy, you’re putting yourself in a real pickle.
You’ll either have to opt for the worst of all the exit strategies (total shutdown), or you’ll have to settle for a vastly lower price than what your business is worth.
Neither scenario is even close to ideal, so take the time to plan your exit strategy now.
INVESTORS WANT TO SEE WHEN AND HOW THEY’RE GOING TO GET PAID
This is a big one that a lot of small business owners don’t always think of.
Whether you are just starting out or have been at this for a while, you may find yourself in need of some cash to get things moving.
Investors will obviously be concerned with things such as the gap you fill in the market, your target market, marketing strategy, revenue forecasts, etc., but they will also be looking for how they are going to get paid.
Including your exit strategy upfront is a great way to win over investors.
Imagine if you pitch your business to a group of investors and then say that they can expect to recoup their investment and get their return in two years because you are going to search for a merger with X corporation.
This type of foresight is not only practical, but it makes you a much more attractive option and increases the chances of securing the investments you are looking for.
Even young entrepreneurs need to pay attention to this one.
Someday you won’t want to, or can’t, work and you need to be prepared for that day.
Most entrepreneurs don’t save enough for retirement, often saying that, “the business is their retirement.”
What sense does this make, though, if you don’t have a plan in place to sell the business for a price that will make it possible for you to retire?
Designing and beginning to implement an exit strategy will have you moving along a smoother path towards retirement.
MOVING ON TO NEW PROJECTS
This is the reason that plays most to the spirit of an entrepreneur; by nature, entrepreneurs love to start things.
The thrill that comes from launching a new project is, as we mentioned earlier, exhilarating.
But you can’t experience this if you are still caught up in your last project.
Be realistic with yourself and know that someday you will want to move onto something else.
Develop an exit strategy so that when this day comes, you can leave your current project profitably and move onto the next one on sound footing.
You can get more helpful details about your options, including different kinds of exit strategies you can consider, in the full blog post from A Better Lemonade Stand.