Exit Planning: the Most Overlooked Business Strategy

An exit plan may be one of the most important strategic tools in your toolbox – but chances are, you’re avoiding it. You’re not planning to leave your business anytime soon, so why bother? I’ve found that most business owners don’t realize the value of exit planning until it’s too late. But a good exit plan could save you millions of dollars, plus years you’ll never get back. Because exit planning isn't really about the exit at all. It's about building a business that works for you, instead of the other way around. Even if your plan is to stay at the helm of your business for years to come, developing an exit plan is just good strategy. With a sound exit plan in place, you give yourself more freedom and flexibility in your day-to-day operations – while also increasing the value of your business, and securing your financial future. Here’s how.

An exit plan simply outlines your strategy for separating from your business – because you WILL separate from your business at some point. Whether your exit is voluntary or involuntary, you must be psychologically, organizationally, and financially prepared for it. A good exit plan isn’t developed at the last minute – it represents your ultimate goals for yourself and your business, so it should be part of your planning throughout the life of your business. You want to ask yourself (regularly!) "what's next?" so that you can prepare for it. Otherwise, you run the risk of working until you just can’t anymore, while also driving down the value of your business and eventually having it completely dissolve.

Creating an exit strategy might be easier than you think – the following steps can guide you through the process.

This is the soul-searching part of the process. What ultimate end goal do you have for your business? In an ideal situation, how do you imagine your separation from your business? Are you currently maintaining or growing your business’s value and success? What is important to you? Receiving a large sum of money up front? Leaving a legacy through the work your business has accomplished? Something else? Do you love what you do – and would you want to keep doing it indefinitely? Or would you like to reduce your work hours, allowing you to spend more time with family, travel, or pursue other interests? Your answers to these questions can help shape what your exit plan should look like. Ultimately, your answers should help you articulate a three- to 10-year vision that aligns your values, personal life, financials, and business. Why this timeframe? Research shows us that it generally takes between 3 and 10 years to optimize the value of your business and to exit it well.

Step 2 asks you to take a good, hard look at your current business and financial situation. This part of the process is all about getting clear on your overall numbers, plus your current resources, systems and processes. Once you’ve clarified where you are and where you want to go, you can reverse engineer a roadmap to take you there.

A good dashboard is key for making sure your vision, your plan and your progress stay top of mind. Being able to visualize how you’re tracking toward Key Performance Indicators can help you stay focused and reach your end goal with more efficiency and less stress.

If you’re planning to eventually exit your business, you must have confidence in the team who will step up to lead. If that’s not the case today, now is the time to make it happen. It’s essential to analyze the strengths and zones of genius for each member of your practice and ensure that the right people are in the right roles. If you have gaps in competence or expertise, it’s time to shore them up. Your exit plan will include measures to develop your team members as the next generation of leaders and to transfer to them the goodwill you’ve worked so hard to build.

As part of your exit plan, it’s important to automate, delegate and eliminate processes. This helps you simplify and streamline your business, creating stability, consistency and predictability. This is critical to your practice's success, so you can sell it, pass it on, or simply take a vacation without worrying that it's all falling apart without you there. Whether it’s an accounting process, project management system or something else, there are concrete steps you can take to loosen your business’s hold on your life.

Don’t wait to start planning your exit strategy until you’re forced to unexpectedly step away from your practice, or realize you won’t have enough money to support your desired lifestyle later. Whether you plan to exit your business in 12 months or 10 years from now, the time to plan your exit strategy is today.