For those of you who own a business or are thinking of starting a business, one of the most important and frequently overlooked activities is to visualize the who, what, when, and how of your exit from your business. Visualizing the end makes you think differently about the asset you are creating.
The time to start the exit planning is as soon as you know what the business will be and how you will make money from this business. If you are beyond the start-up phase, there are ways to start the process without it consuming a lot of time or money. Planning while you have the luxury of time is money in the bank and worth every investment you make in the process. The alternative is having the process forced on you or your successors due to a catastrophic event.
At some point, regardless of whether it’s in 5 or 10 or more years, your business will be worth something to another entity – if you are smart and start planning for it well before you plan the exit. Exits happen for a number of reasons whether it’s retirement, illness, boredom, wanting to make a change, relocation, or death. What, hard enough to start and to maintain a business without thinking about the end of the business you say? Thinking about the exit will keep you going during those long 16+ hour days, 7 days a week that are sometimes required.
More importantly, if you start thinking about the value of your business to someone else, this way of thinking creates focus particularly with all the options, side roads, detours, and completely off-road trips that we can all be susceptible to as we are establishing and maintaining the business. As someone once advised, wear the hat of the buyer as you review your company status. Or, run the company as if you were acquiring the company. If your company is in an uproar when you exit, you will get far less value for it – people do not want to buy problems, and like residential real estate, the buyer will try to get you to fix the problems before taking ownership.
A few rules of the road as you begin this exit planning journey: entities purchase businesses with customers, businesses that are growing, and businesses that know how to manage their money (also known as, show a profit each year no matter how hard it is). It is certainly possible in the tech world to sell a prototype application or completed application without customers if it solves a particular problem. We hear about this all the time in the news but it happens as frequently as a lightning strike. Take the time to write even a simple strategic roadmap or business plan (even with bullets), and don’t forget to write the last chapter first.