Does your business plan include an exit strategy? If your answer is “not yet” — or if this is the first you’ve heard of it — you’re not alone.
What is an exit strategy?
Put simply, an exit strategy is how you end your business — either by selling the business or slowly phasing out your involvement. With a solid exit strategy in place, you bring your business to a logical closure.
Which is why it isn’t even on your radar yet.
Most new small business owners get caught up in the short term — understandably so! You’ve successfully launched your business and now you’re focused on keeping up with day-to-day operations. It might seem strange to imagine the end when your business is thriving and you still love what you’re doing.
The surprising truth is that an exit strategy can actually help you grow and improve your business.
Here’s why….
Why should you create an exit strategy now?
As a small business owner or entrepreneur, caring and tending to the growth and development of your business makes it a bit like parenthood!
It can be hard to let your baby grow up — which is one reason many small business owners avoid developing an exit strategy as part of their business plan.
However, when you determine your business goals and how you’ll achieve them — with a keen eye for the logistics of the final stages — it prepares you mentally and emotionally for this eventuality. Creating an exit strategy makes it possible to chart your own professional trajectory up to and beyond your current role in this particular business.
Above all, planning for a graceful exit in advance means you’re planning a profitable exit, with you in the driver’s seat.
Timing your exit
When you’re developing your business plan all the way to the end, you’re outlining the actionable steps on that path that will get you there. Which is just good business practice.
What triggers will initiate your exit strategy? The first buyer who makes an offer? A buyer who shares your values?
Perhaps your metric is a specific financial goal, or an achievement such as the number of clients served.
While you can’t foresee every outcome, it’s also worth thinking about external factors and life events that could initiate your exit strategy.
Market or industry forecasting, demographic changes in your community, and fluctuating global markets could all impact your business. Or perhaps there will be changes in your family’s needs, or your own health and wellness, that could put your business in the backseat.
Your business plan already includes your goals and purpose, both short- and long-term. Your exit strategy just takes this one step further and sees those goals through.
Calculate your business’ value
Know your worth — your business’ worth, that is. This is a key component of any exit plan and, again, it’s just good practice for business owners.
At its most basic, when you assess the value of your business you’re calculating the difference between your assets and liabilities. It may also involve an assessment by your lending institution. Finally, it may help to have a detailed record of financials that show your business’ true worth over a period of at least three years.
If this sounds overwhelming — don’t panic!
With Clear Books online accounting software, it’s easy to track your business earnings and know your company’s worth. Invoicing, expense tracking, VAT reports, balance sheets, as well as profit and loss statements, your business’ financial information is at your fingertips from anywhere in the world.
Determining your business’ worth is an essential part of an exit plan, and with Clear Books, it’s a manageable task without headache or hassle.
Not a hard exit… but a new chapter
Maybe your exit isn’t a “hard” exit, and instead is a gradual transition into a new role or a new business. How will you pass the reins to the next CEO?
Transparency is a key component of a healthy transfer of either ownership or leadership.
You want to make it as easy as possible for your successor to understand all aspects of your business. Spending time designing the orientation resources they’ll need — a manual of your procedures and protocols, a master document that includes contacts for software support, a listing of all of the software and automations you’re using — is a great place to start.
And the good news? If you have Clear Books software for your business finances (including payroll), your financial operations are already documented digitally, which will give your successor all the information they need to hit the ground running. And that means you can pass the baton with confidence, whenever you’re ready to do so.
Whether you’re selling your business outright or slowly stepping away, with an exit strategy in place you’re the one who gets to call the shots in your endgame. And keeping an eye on your eventual endgame will set you up for success at every stage along the way.
Clear Books Online Accounting Software
Clear Books is an award-winning online accounting software for small businesses. Thousands of business owners, contractors, freelancers and sole traders across the UK use our easy-to-use online accounting software to manage their business finances. All users benefit from the outstanding free telephone and email support. Clear Books was launched in London in 2008 and offers a free 30 day trial with free ongoing support and bank feeds. We’re rated as ‘Excellent’ on Trustpilot.
Get a free 30-day trial of Clear Books online accounting software here.
