It can be difficult to imagine ever abandoning a business when you’re just getting started, especially if it’s something you’re very enthusiastic about. It may appear paradoxical to plan your leave.
Planning an exit strategy from the start is one of the best things you can do for your company, especially in today’s fast-paced business world. Experts advise including an exit strategy in your original business plan.
A firm is similar to any other asset, and a wise entrepreneur understands that when the time comes, they can sell it for a profit. However, selling your company is only one way for departing it.
Advantages of Having an exit strategy in your business
It entices investors
An exit strategy is extremely critical for businesses looking for investors. Almost all investors will inquire about your exit strategy before investing in your company. The response you give them could make or break your chances of getting a loan. Investors are wary of enterprises without an exit strategy since it could indicate that the entrepreneur is more interested in creating a lifestyle business than a prospective high-growth venture.
An exit plan ensures that an investor will see a profit on their investment. This is especially true when an investor buys a company’s shares rather than simply giving it money. A company’s equity has no market value until it goes public, sells, or merges with another company. Investors worry that if you don’t have an exit strategy, you’ll be hesitant to buy them out or offer the return on investment they expect.
When considering risk and reward, investors also inquire about the founders’ exit strategy to assess their flexibility and ability to make difficult decisions. They want to know if you can imagine different scenarios and understand the business environment.
It provides guidance to your company
You don’t have a clear endgame for your company if you don’t have an exit plan. It’s like boarding a bus without knowing where you’re going. You’ll find yourself in a circle.
Every company choice is fine-tuned after the exit strategy has been defined. If you’re considering merging with another company, for example, you’ll consider their interests.
When unforeseen occurrences occur, an exit strategy is also useful. For example, if you are forced to leave early due to a severe injury or illness, you can quickly trigger the exit strategy without causing the company to lose value.
It appeals to potential buyers
An exit strategy also improves your business’s appeal to purchasers, which is critical if you decide to sell for any reason. Buyers prefer businesses with a defined strategy and ultimate goal, as well as founders who have appropriately planned for their exit from the company. An exit strategy also demonstrates to buyers that you’re serious about selling and are unlikely to alter your mind in the middle of a deal.
Assists in the prevention of disasters
Whether you want to sell the company in a year , having an exit strategy ensures that your company will be well-cared for in the case of your untimely death. This is especially critical if your family’s current standard of living is dependent on the business.