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Why it’s Key to Include an Exit Strategy in Your Business Plan

By Generational Equity

10/11/2017

“We know established businesses grow 30% faster when they plan. We also know that eating right and exercise are good for us, but a large majority of us don’t.” Jon Umstead, Business Planning – Are We Looking at It Wrong?

What do you expect your company’s revenue to be in three years’ time? Who is the next hire that will support company growth? Most importantly, how will you exit your business when the time comes to depart?

If you stumbled on the answers to any of these questions, it is likely you don’t have a business plan. There are lots of reasons why you should have a plan in place, but many company owners find excuses to avoid doing so:

  • It’s easier to not make one
  • I don’t know how
  • There’ll be no consequences if I don’t do it

These are conclusions reached by Jon Umstead in his article for the National Center for the Middle Market. But, without this essential plan in place, how do you know where your business is going to be one year, five years or ten years down the road?

A business plan provides the blueprint for your business operations – your comprehensive guide to what your business does, what it’s going to do, and what it's going to achieve.

How much detail you put into your business plan or what outline or template you decide to use is up to you. But, we can’t stress enough how valuable this is to company growth and building your company’s value to buyers.

Creating a plan like this is a key part of our process to selling a business through Generational Equity. This demonstrates to buyers what your company is worth, and more importantly, what it hopes to be worth in several years’ time.

However, this process shouldn’t start as soon as you’re ready to sell – ideally, it should start the day you open for business.

Starting Your Business Plan with Your Exit Strategy

“All good business planning documents have a clear business exit plan that outlines your most likely exit strategy from day one.” Daniel Richards, Writing a Business Plan: Creating a Business Exit Plan

A standard outline of a business plan will include a number of important details, including:

  • Mission statement
  • Competitor analysis
  • Financial plan
  • Management strategy
  • Timeline

All are important, but where do you start?

Although it seems counter-intuitive, most are in agreement that any solid business plan starts with your exit strategy. Why would you start by imagining the time when you’re no longer in charge? Because, above all else, an exit strategy represents your end goal, and so you will approach company growth by ensuring you can exit in the most beneficial way for you and your family.

After all, isn’t it much easier to decide how you are going to reach your destination when you know where that is? Because as Lewis Carroll once said, “If you don’t know where you are going, any road will get you there”!

Plus, there are two more extremely valuable reasons to include a clear exit strategy in your business plan:

  1. It gives you a clear idea about WHEN you want to sell your business
  2. It shows potential buyers the future for your company

This makes your company more “investment ready” to buyers than a competitor without this forward thinking. By organizing your exit strategy from the start, you demonstrate to buyers that your business has been built with them in mind, and that they would be ideally suited to choose your company over another.

For more information on developing your business model with an exit in mind, download our free white paper How To Make Your Company “Buyer Ready”.

Begin Your Exit Planning at an Executive Conference

If you’d like to learn more about what to include in the essential exit strategy section of your business plan, join us for a complimentary executive conference. These are held regularly across the U.S. and Canada, and equip you with the knowledge and tools to sell your business for an optimal value. In just a few short hours you will understand when the best time to sell is, what buyers are looking for, and how to build your company’s value.

Discover what you can expect at our conference and when Generational Equity will be in your area next on our website. Alternatively, you can reach us at 972-232-1121 where one of our team can help with any inquiries.