For many small business owners, the thought of transitioning out of their business may be years away, if ever. 

But even if you never plan to retire or transition your business, understand that planning an exit strategy is like having a will in place. No one wants to get to that day, but it is inevitable. 

Having an exit strategy in place ensures a long-term success for your business and your vision.

An exit strategy is an important consideration for business owners. Yet, they usually don’t think about it until they are forced into one. 

Without an exit strategy that directs your business – you’re limiting your future options.

A good exit strategy should maximize profits for those businesses that are doing well and minimize losses for those that are struggling.

Benefits of an exit strategy


Planning an exit strategy in advance is more than preparing for unexpected circumstances; it builds purposeful business practices and focuses you on your biggest goals. 

Even though an exit plan may not be used for years or decades, developing one benefits you in the following ways:

• You make your business decisions with a clear direction;
• You remain committed to the value of your business;
• You make your business more attractive to buyers;
• You guarantee a smooth transition;
• You make sure that you achieve your business AND personal goals after the exit.

Here are 10 steps you can take in creating an Exit Strategy:

1. Identify Your Goals


Set your business goals, and review them annually, keeping in mind your long-term vision for your company. You should consider what role you want to play in the company when you retire. You will want to carefully consider whether you want to sell your business or transition ownership to a successor.

2. Analyze Your Business


Many factors, including company performance, market conditions and your industry can impact the value and worth of your company. In your plan, you should research all those factors that will influence your transition.

3. Prepare Your Finances


Smart buyers will want to see at least two years worth of clean and dependable financial records. If your bookkeeping isn’t all it could be, get it fixed now. And if there’s something you can do to improve profitability, do it as soon as possible.

4. Choose a Target Buyer

There will be different priorities depending on who you’re selling to. If it’s family members, make everything transparent and fair. You don’t want the transaction to cause tension or conflict between children. If you’re selling to employees, be prepared for to accept payments. They’ll probably start with a deposit and pay you the rest from business income. If you sell to the highest bidder, then get all your records in order as otherwise they won’t have any idea how you operate, or what sort of money you make.

5. Decide How Fast You’ll Want Out

Some buyers (e.g. family or employees), won’t have the cash to buy you out straight away. You might have to keep an interest in the business and stay involved to protect your investment. If that’s the case, you’ll need to negotiate consulting fees. If you want a clean break, you’ll probably be better off selling on the open market. That may not work if you have a service-focused business. In this case, buyers will expect you to stay around to help ensure clients don’t leave.

6. Make Yourself Redundant
No one’s going to buy your business if it can’t survive without you. If you have employees, give them the training and authority they need to succeed. Scale back your involvement. Be less available to clients and employees. Delegate big decisions. Go into work less often.

7. Systemize Your Business

Create (and document) formal (and efficient) processes for getting work done. Who does what, when, and how? Potential buyers will be impressed if some things in your business happen automatically.

8. Write Down How Everything is Done

Write a “how to” manual for your business, so that a stranger could pick up the reins and run everything tomorrow. Record every process, including admin. Make a note of the steps you follow for each of these tasks. Write formal job descriptions for employees. And create templates for tasks that are repetitive.

9. Get a Valuation of Your Business

When you’re planning your exit strategy, you’ll want to know how much your business is worth. Strategists can help you do your due diligence for a business appraisal so that you can figure out how much your company is worth. This can help you set the price (and expectations) for potential buyers.

10. Find Ways to Increase the Valuation


What are the things that make your business great? Do you have a really outstanding product? Loyal customers? Amazing intellectual property? Find the strengths in your business and grow them, so that they become even more valuable. On the other side, figure out the biggest weaknesses in your business and fix them.

Now It’s YOUR Turn

For five minutes… think about your exit strategy… How would it look like, when, and what do you need to do to prepare?