Nothing raises anxiety more than uncertainty, and business owners are constantly up against the unknown. Market changes, comprehensive tax reform, personal developments—any number of events could dramatically change the way business owners operate their business and their decision-making, particularly when it comes to their exit strategy.
While daily business operations are important, it’s critical that business owners keep an eye on their end game. Too much emphasis on the immediate needs of the business could distract from these more personal long-term goals.
In times where unknowns outnumber the knowns, it’s critical that business owners have a clearly defined, long-term vision for their business. Creating a vision and plan for integrating that vision into a business strategy can be as simple as following these seven steps.
Step 1: Begin With The End In Mind
Start at the beginning. The need to incorporate an exit strategy into business plans begins when individuals acquire or start their business.
How the business will be funded is a primary concern. Will the business use its stock as currency, such as the use of stock to pay compensation and raise capital? Or will the founder(s) avoid diluting their ownership interests in favor of other operating strategies? This choice will have a dramatic impact on the growth of the company and the value that can ultimately be harvested to fund the owners’ exit from the business.
Another key concern to have in mind at the outset is the founder(s) expected time frame to exit the business.
Step 2: Get Personal
It is helpful for business owners to assess their personal financial and non-financial status and future goals as the foundation for future planning. The objective of this assessment is to develop a statement of the life they would like to be leading within a reasonable, and defined, time frame.
Understanding where business owners are today and where they want to be within a given time frame can help identify the costs involved and financial resources necessary to afford the life style of choice.