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What is an Exit Plan and Why Should I Care?
As a small business owner, you’d rather plan for growth than for the end game of your business. Someday, whether by design or by accident, you won't be there to run your operations. What happens then?
Or maybe you’re looking at your small business as an investment, in which case an exit strategy is part of your business plan before you even start the business. An exit plan will guide how you develop aspects of the business and define goals to reach in order to get the most out of your investment or limit your losses.
What if there’s been a catastrophe, or you are facing legal or health issues? Or the business is not as profitable as you had hoped or the industry has changed dramatically? Or you are simply 'winding down' the business?
For the average small business owner, planning an exit strategy has several advantages:
- More control over when there’s a valuation of your business
- Determine when it’s the best time to sell or transfer the business
- Work through and prepare for how the next generation or the new owners can succeed with the business
SCORE mentors can help you take an objective look at your current situation with a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) on the small business and on the owner and then work with you through the necessary steps to build an exit strategy.
What are my exit strategy options?
It depends. Are you the sole proprietor, or are there partners or investors? What type of business it is and what’s the size? Has the business got a strong bottom line or is it failing? What competition is there?
SCORE mentors can help you sort through the options that are available to you to consider for your exit strategy.
Family Business Succession Planning
Whether you already have family in the business, or you are considering it, consider:
- Many family businesses fail when handed to the next generation because they haven’t:
- Prepared the next generation (and yourself) for succession
- The family has not been aligned in their vision
- There hasn’t been a family conference for succession
Selling Your Business or Transferring the Business to a Third Party
Maybe you want to sell your small business to an existing partner or the employees. Maybe you need to find a buyer. Some potential steps:
- You’ll need to determine what the company is worth (the valuation of a business)
- Due diligence on prospective buyers
- Do you have a good management team in place? Will Management team stay? Are they motivated? Has there been low turnover?
- Do you have loyal customers and stable vendors? Or are they all high risk?
Close Down the Business
Maybe it makes sense to make as much profit as you can and then close the business. But don’t forget, you may still have assets that are of value that you could still sell off.
Conclusion
However you exit, remember that you are currently the boss. Right now, you get to decide how this process will go. You don’t have to do it alone! Meet with a SCORE mentor to work through your exit strategy planning!
