Course: Creating an Exit Strategy
Lesson 1: HOW TO CREATE AN EXIT STRATEGY
Just revving up or about to retire, you need to know what the plan is to transition out of the business and help a new leader transition in. Lynette Khalfani-Cox a personal finance expert and founder of Ask the Money coach.com, is teaching a course on The Exit Strategy. Review the first lesson on How To Create Your Exit Strategy and get your business in order.
Every business owner needs an exit strategy; this is true for the startup entrepreneur, part-time entrepreneur, long time business owner, or the serial entrepreneurs. An exit strategy simply put is your game plan for when you leave a company, sell it, or disband it. An exit strategy also helps you plan ahead, in the event of a death, disability, or a divorce, or anything else that would affect your operations. You don’t have to be running a multi-million dollar company or have lots of employees to require an exit strategy. Even if your venture is a sole proprietorship or two person operation, you should give careful thought to you and your businesses future.
An exit strategy plays a crucial role in these matters. The harsh reality is that most small businesses don’t last more than a year and even those businesses that do survive often struggle for years. No matter how much hard work you put into building your business, there may come a time where you have to pack up and walk away. But that doesn’t mean you can’t maximize the return on your investment. You can exit gracefully and do well financially by crafting a good exit strategy, start by figuring out what you want to happen. How do you want things to unfold? Will you be liquidating assets, or selling off parts, or all of your business. If that is that case, how much is your business worth in total or broken down into parts? If you want to be acquired by a bigger company or even a competitor, are you keeping good financial records for a potential buyer? If you plan on running the business until you retire, perhaps, your game plan is to pass the business along to a family member, make sure anyone you have in mind, will truly want to take the reins of the business. Not everyone wants to run a business, even if the enterprise is doing very well.
So no matter what stage your business is currently in, or how its fairing economically, remember these 3 tips when forming an Exit Strategy:
1. Consider all possible exit strategies apart from selling. Think about a merger or passing on the business to a family member or trusted employee.
2. Groom another leader. Too often leaders fail to groom other talented individuals to replace them, but if your exit strategy simply involves only you moving on, but the business remaining to operate, you need to hand pick a successor.
3. Consider the impact on others . At some point in the future you might be fine leaving the business how would your departure affect employees, family members, and customers, For example, if relatives gave you loans to start your business, plan for how you will repay them or cash out any equity they may have in the company. Likewise if you have a loyal team of employees who have been with your company since day one, consider how shutting down or selling off will impact them. Do what you can to protect them that have protected you along the way.
In the end having a proper exit strategy can be liberating. When you’re ready to retire, sell, or simply move on to the next big thing, an exit strategy can give you freedom to do just that.
Lesson 2: WHO TO TRUST WITH YOUR BUSINESS
It’s a tough choice but it’s a must choice—knowing who you’re going to trust with your business. In lesson 2, Lynnette Khalfani -Cox tells you all the pieces to consider when making that important choice. Who to trust with your business?
There comes a time when every business owner starts thinking about moving on from his or her business, maybe you’re approaching retirement age, the business has become all consuming, or maybe you just want to move on with other projects. If the business is continued, who can you trust to keep the business going? This is a heavy question especially since most of us entrepreneurs have invested heavily into our businesses, financially, emotionally, and time wise, so here is what you need to know about finding the ideal person to trust with your business.
If you have family members that are employees of the business, or just business savvy, one option is to pass the business on to them, but when you’re considering relatives like a sibling, or a child, it’s important to look objectively, at their talents and readiness for the job. They should have the maturity necessary to take the reins, they should also possess the leadership skills, and the temperament to lead your business, and equally important, running your business should be a role they would relish and not just accept out of obligation or pure financial needs. Family dynamics should be partially considered. Will naming a certain person to replace you set off a family feud, that kind of drama could taint the business, cause family in-fighting, or jeopardize customers relationships. So think long and hard about whom you name and how to minimize potential disruptions.
Don’t overlook opportunities to sell off the business to someone else outside the business, or to bring in and outside person to run the business. If you have a business partner or a key employee who already knows your business well, considering grooming them for the job. Many small business owners are surprised to learn that even competitors or other companies sometimes make good options, when you are deciding whom to trust with your business.
Ultimately consider these 3 tips when deciding who to trust with your business:
1. Consider in house talent first. An existing business partners, colleague, or even an employee may be your best bet. You could possibly work out a deal, where you could be an advisor or a shareholder, but you would be completely hands off, as far as business operations are concerned. As a silent partner or shareholder, you could retain certain voting rights and still benefit financially from the ongoing success of the business.
2. Don’t rule of the competition. Being acquired by your competitor or another company can also work in your favor, when you exit a business. You may get a hefty payout for the sale of your company, plus if the acquiring company shares your vision for how you want the business to continue to grow, that helps ensure the viability, and the long term success of your company.
3. Learn to let go. Coming up with an exit strategy can be one of the most challenging parts of business planning, because it’s not always easy to think about the idea of letting go of your business. But don’t fall into the trap of thinking that you can’t trust anyone or any company to take over your business, that’s a short sided approach and probably not true.
So before time changes start thinking now about an appropriate successor. Picking the right person or company is a vital part of your exit strategy.
Lesson 3: HOW TO ENSURE THE COMPANY LIVES ON
You’ve put your heart and soul into building your business, now it’s time to make sure your legacy lives on. When you’re moving on from your business or planning your transition, you may not want the company to simply end when you leave. Think about taking the right steps now to ensure that your company outlasts you, maybe even, outlives you.
Consider using these tips to ensure that your company thrives long after you have walked away:
1. Create a succession plan for your business. This involves more than just picking a future leader to replace you. It’s also about making sure that everyone impacted by the business is taking care of in your absence. So your succession plan should take in account, needs and concerns of employees, customers, and even your vendors and suppliers.
2. Think about your company’s brand and what it stands for. If you’re known for delivering unbeatable customer service, how can ensure that philosophy endures. One way can be to write specific policies and procedures that reflect your vision of what the company is and should always be.
3. Be willing to accept change. Recognize that after you leave, some things will inevitable be different. Sometimes change can be good, as long as the underlying strengths of a business remain intact.
No matter how much time, energy, and resources, you put into building your business, there will come a time when you will move away from the company. Whether you decide to retire or sell off a business to a competitor or a colleague, doing it the right way, can help you establish a personal legacy and a business legacy too.
You can sure a smooth transition by focusing on these 3 strategies to help your company live on:
1. Make a succession plan now, not later. Look at your existing roster of talent within the business and think about who could run the business after you’re gone. If you don’t have a partner, employee, or a family member who can be up for the task. Look outside your immediate network. A savvy executive at one of your competitors might fill the bill or a company you now consider as competition might be the very business to take over your operation and keep it going.
2. Strengthen your vision. Do you have a crystal clear vision and purpose? If you don’t have a clear vision in mind, you probably can’t share it with your employees, business partners, relatives, or others who might carry on the business. Make sure everyone is inspired and dedicated to work towards your vision. This will allow you to build a company that will have strong sense of purpose and direction for the future.
3. Clean up your financials. Make sure finances are in order to make sure that your business can continue to grow and build upon its previous successes after you depart.
If you’re company keeps running into cash flow problems, tax difficulties, or other they’re money issues, work at fixing those problems immediately. Your company won’t survive if your financial side is a mess.
Take the time to clean up the financials and instill some solid processes for managing cash flow, so that your company can continue to thrive for years to come.
To learn more about The Black Enterprise Small Business University series visit