Yes, You Need an Exit Strategy
When someone gives you a report to read, you inevitably flip to the last page to see how long it is.
If they want to schedule a meeting, you always ask, "How much time do you need?," so you have a good idea when the meeting will end.
Before setting off for a trip, you have a handle on when you are going to get there.
In fact, before you do just about anything, you have a good idea of what the end result will be.
So, let me ask you a question. What's the exit strategy for the company you founded?
The Key Question No One Really Thinks About
As the owner of a business, when you meet with a financial advisor of any sort--accountant, lawyer, broker--they are invariably going to ask you at some point about your exit strategy.
They are asking it because it is a basic part of business.
They want to know how are you are going to cash in on your investment, the fruits of your labor. How you are going to monetize all the time and effort you have put in.
I am asking, too.
I am not looking for the way most entrepreneurs answer the question. My entrepreneur-wife, a woman who owns a successful (30-employee) consulting business, is typical in the way she responds.
"I plan to sell in 10 years," she always says.
It is the same answer she has given me since I first asked the question--in 1997.
And I also am not looking for the general, "I will sell" answer unless it is accompanied by a level of specificity: "I am going to do an ESOP; I plan on taking the company public; I will help my employees do a leveraged buyout; I have already had very preliminary talks with X about buying me out."
What I am looking for is the answer that is as complete as you would give to any complicated business challenge, because that is exactly what it is--although far too often, entrepreneurs don't view it that way. They are so busy building their business that they never give serious thought to what is going to happen when it is time for them to leave it.
That's a serious mistake on a number of levels:
1. It could leave the business adrift, even if you have appointed a successor. (Do your employees know what, if anything, your role is going to be after the handoff? Are you the chairman of the board? Completely gone? Something else?)
2. Personally, what exactly are you going to do with yourself, once you are no longer running the company? There is only so much golf a person can play and only so many times in a given year you can visit the kids and grandkids.
3. Financially, the more time you have to plan, the better off you--and the company--are likely to be.
So, next time someone asks you about your exit strategy, by all means make a joke--"They are going to carry me out of here with my boots on"--all the while knowing you actually do have a plan.