An Exit Strategy: Is it Necessary?

Every business owner eventually exits his or her business. Some owners leave by choice (retirement, career change) while others depart due to changes in the market, circumstances beyond their control or because someone outside the business changed something that prevented it from continuing.

As the owner, you are the champion for your business and, specifically, for the future beyond your personal involvement. Your reaction may be, “That’s way down the road. I need to focus on getting and serving clients now.” While both are definitely pressing issues, it is never too early to start thinking about your exit strategy.

You can choose to let your exit evolve organically or you can choose to take control to influence the outcome. The following questions will help you decide if you want to adopt an exit strategy:

What do you want for your business? You are having an impact in the world via your business. You are helping your clients create the changes they want in their life. Perhaps you have even created models, processes, tools and materials to enhance your work with clients. Who will continue this work? Who will serve your clients going forward?

What do you want from your business? You have invested in the startup and growth of your business: funding, training, credentialing, mentoring, networking. You made the decision to forgo a steady paycheck, instead believing in the potential growth of your business. Do you want to maximize your return on the investment of your time and money?

Two Paths

On the first path, the future for your business emerges organically. You simply let the business run its course. In this case, one of the following events is likely to occur:

• Due to illness, injury, or the need to care for an ill family member, you are no longer physically capable of operating your business and the business is not sustainable without you.
• You die, and your business (i.e., assets and liabilities) becomes part of your estate. Your beneficiaries determine the future of your business, based on the provisions (or lack thereof) in your will.
• You lock the doors and walk away. The business is not sustainable; once you have paid your expenses there isn’t enough left to pay you. In the worst-case scenario, you have exhausted your savings and your retirement funds; perhaps you are even taking debt with you beyond the life of your business.
• Someone else decides it is time to close the business. Often, this is the result of intervention by another entity or person, such as a bank, tax agency, investor, landlord or business partner.

On the second path, you actively create the future for your business:

• You make a conscious choice to wind down and walk away from the business. By taking specific steps, you ensure your clients will be supported going forward and your business affairs are closed out methodically. You leave the business feeling complete and you meet all legal requirements to dissolve the entity.
• You gift the business to a family member, a coaching colleague or another entity to continue your work. This outcome assumes your identified successor wants to continue to operate your business.
• You sell the business. Selling to a family member, friend, partner or another entity is a common dream of business owners. However, there has to be something to sell. If you are your business (meaning that when you walk out the door, income generation stops) then there really is nothing to sell. Another business may be willing to purchase your mailing list or your client list, but that is likely a meager return on all the time and money you have invested over the years.

You can use the time between now and your exit to create value in your business that a buyer will be willing to pay for (i.e., monetized intellectual property, such as online courses, paid membership sites or proprietary materials.) If a buyer can step in and operate your business without you or integrate your business into an existing operation, you can step away profitably with the knowledge that you’ve helped accelerate another business’ growth.

Now What?

The action-planning template below will help you decide where you go from here.

Deciding the future of your business is a personal decision. The time you spend now considering your exit strategy is time well spent—for you, your business, your clients and the world.