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Start-Ups

Exit Strategies for Entrepreneurs

By Barbara Beauregard   |    April 24, 2015   |    9:37 AM

Why Every Entrepreneur Needs an Exit Strategy, and Know How to Develop One

A good business plan for any entrepreneur needs to include an exit strategy. But, as their businesses successfully grow, many entrepreneurs find themselves without a pre-planned exit strategy in place. Few entrepreneurs begin their businesses with the goal of leaving them one day, however, most would agree that they'd love to see their ventures grow and evolve.

An exit strategy is a helpful tool that lets you define your business's success, and helps determine when it's time to move on from one business venture to the next, here's what you need to know to help you develop the most effective exit strategy.

Why is an Exit Strategy Important?

It's easy to overlook your exit strategy, but failing to develop a plan could be a huge mistake. Some business owners even think that the exit plan is the single most important component of any business plan. One successful entrepreneur put it this way: “[An exit plan] gives you, the entrepreneur, a focus for your efforts and allows you to set up your entrepreneurial endeavor with the end in mind. It also allows you to clearly communicate your goals and expectations to your venture team and investors."

Investors like to see pre-determined exit strategies, and having a plan will only help you, and the rest of your team.

How to Develop an Exit Strategy

Ideally, you'll create an exit plan when you create your initial business plan. But, if you haven't, it's not too late to start. If you already have an exit strategy it never hurts to re-visit your plan on a regular basis.

Research your exit options

There are a variety of ways to exit a business venture, from mergers and acquisitions, to IPOs, to simply selling the business off to a buyer who shares your values and enthusiasm for the company. You need to understand all of your options early on, so that you can determine when the timing is right later on.

Determine what success looks like to you

Entrepreneurs start their businesses for different reasons. Some want to make the world a better place; others want freedom from the typical corporate world. Your initial business goals will play a large role in determining what your end goals are.

Some things to consider are: what do you want your future role in the business to look like? Do you want to take your company public some day (if so, you'll need to begin working on meeting certain requirements early on)? Would you only sell to someone who shares your same vision and values?

Plan for Negative Outcomes, Too

Every business owner hopes that their venture will grow wildly successful. Unfortunately, that isn't always the outcome. Having an exit strategy is also important if the unfortunate were to happen – your business fails.

Spend some time and energy thinking about what you'll do if your business fails, and how you'll move on to your next project. It doesn't have to be a sad, sorrowful thought process, either. Sometimes, one failure is the catalyst for your big break (but always be sure to have an exit plan for that big break, too!)