Most entrepreneurs do not understand the real value of an exit strategy. They often wait until something happens before creating a plan. Recent research revealed that 72% of small businesses do not have an exit plan, 14% are working on a plan, and only 14% have a formal exit plan.
An exit plan is as essential as establishing a business plan for a small business. Here are the top ten reasons from All Business why you should start working on that exit strategy sooner rather than later.
1) It gives you a clear vision for the future
An exit strategy will help you plan for the future of the company and the person who will take over the company. You will know when to hire full-time employees or seek out freelancers. You can establish your goals and create strategies on how you will achieve these goals.
2) It will help you identify mediocre offers
Research shows that 45% of sales are only beneficial to the buyers due to lowball offers. An exit strategy will help you evaluate whether or not the presented proposal is good enough for your small business.
3) You will know the worth of your enterprise
A thorough evaluation of your company’s financial position, intangible assets, potential buyers, and the respective market conditions will help you determine the value of your business.
4) You will identify the time for selling
An exit strategy will help you identify the perfect time for selling your business. With a definite period of operation in mind, you will be able to focus on developing the business and preparing it for sale.
5) A business with an exit plan is more attractive to buyers
An exit plan shows buyers that you have clear visions and goals for your company and you have dedicated your time and resources to ensure your business achieves those set goals. An exit plan also conveys to buyers that you are 100% committed to selling the business and you won’t change your mind in the midst of transactions.
6) You will be psychologically prepared to leave
Sometimes it can be hard to let go of something you created, therefore leaving you hesitant to leave. An exit strategy prepares the entrepreneur for departure by reminding him/her of the goals to be achieved throughout the duration of the operation.
7) You will take advantage of a strong market
An exit plan will help you identify the perfect time for selling your company. You can capitalize on a strong seller’s market and receive the maximum offer for your business.
8) An exit plan provides the necessary paperwork for an exit
Without an exit plan, the process of exiting your business can be tedious, time-consuming, and expensive as all the paperwork then has to be done from scratch. However, with an exit plan, you will have all proper documents prepared.
9) It prepares you for negotiations
The information contained in an exit plan should include the worth of your business and reasons why it is and will continue to be profitable. With this information present, you can negotiate and convince the buyers that they will yield high returns from your small business.
10) It gives you control after selling
Planning for your exit early enough gives the entrepreneur time to plan for his future after the sale. He/she exits with the maximum value for their business. Without an exit plan, business owners are at risk of getting low offers which might render them bankrupt after exiting.
An exit strategy acts like a blueprint for your future and that of your business. With it, you can set your business’s goals and set ways to achieve them. Create an exit plan and let it guide you through your operations.
