Businesses Without Exit Strategies Often Die Slowly

Choosing the time to leave your business

With so much emotional energy invested into your business you are likely to not make the right decisions when it is critical to do so.

For example, when you are throwing good money after bad in your business and watching it all going to waste, you try and hang in there hoping that things will get better.

Too late, the business folds and all your investment goes with it.

What is an exit strategy?

In the initial business planning stage you need to decide how and when you will exit your business. Normally the exit planning covers situations such as;

• The market stalls or declines rapidly
• Someone makes an offer to buy your business
• Sales revenue drops below a certain trigger point for a period of time
• Licencing laws change making it impractical to continue cost effectively
• You want to retire or hand on your business to your family

Your exit strategy will include the details necessary so you can make the right decisions when a moment of crisis impacts on your business operations.

Recent example of not having an exit strategy

A new start-up business in the childrens party industry based its financial forecasts on certain trading hours. Everything looked good in the budgets and predicted sales forecast were achievable.

Before opening the leased premises the new business hit a snag with permits and ended up with unplanned legal costs and forced changes to the trading hours.

This is where the exit strategy plan would have been useful for reference. With no strategic review of their current situation the owners continued to launch their business idea.

What happened?

Months later the business is struggling to make costs and has little cashflow to stimulate additional sales through advertising. It seems that no one reviewed and adjusted the prior budget based on the initial opening hours.

The adjusted hours does not give enough hours per day to make the planned sales and the planned advertising budget was used to meet the legal costs.

At this point the owner should have thought about an exit option. Looking at the actual budget and lack of advertising budget the owner should have established a certain profit/loss figure as a trigger point to exit the business.

Why have an exit plan?

By planning early you already have the phone numbers and contracts established to sale equipment and stock in an orderly process. The other option is to suddenly realise that you have to lock your doors because you became insolvent just after lunch, and breached all your contracts.

It costs nothing to have exit strategies and will save you peace of mind when or if the moment comes to your business.