The best advice I could possibly have received, something I wish I had heard 14 years ago when I started my first business was from one of my greatest mentors, 3 years ago. One simple question that I initially found a little offensive and glum, in a time when everything was positive. I was focused on embarking on an exciting new venture; these 5 simple words really upset me:
“What is your exit plan?”
Exit plan? How dare you!? I just got into this venture, why do I need an exit plan? Why do you make everything so negative? Well… I certainly learnt the hard way! I had shareholders, and no exit plan, I had partners and…no exit plan. The young, submissive me thought, ‘People are great; I do well, and people will have to love me and my work.’ I also had emails to say how great my team and I are. Just not good enough — I should have had an exit plan.
Just another reason why every business owner can benefit from having an experienced business mentor.
PLAN. YOUR. EXIT.
When you are going into ventures with partners or even just solo, there are so many reasons to have a great exit plan:
1. What do I want to do with the business in 15 years?
2. Do I want to sell it? Do I want to leave it to my kids?
3. If I have partners, do I need to sell my shares to them, even though I might get better value selling outside my shareholding group?
There are so many questions that most people don’t like to think about, because well, it’s depressing thinking about exit plan when you are so eager to enter.
But like any good marriage, things sometimes just don’t work out. People sometimes just become greedy, the plans you had for your business changes, due to the current economic climate — you need to have an exit plan!
Every company has a constitution and that constitution can be a downloaded template, or well-written with a good solicitor. Ensure you have one. Ensure, if you are a sole trader or have shareholders, that you fully understand what your constitution comprises. This might affect your exit plan — read it prior to making one.
An exit plan is not just for ugly break-ups. It is also for happy endings — for example, you, John Smith, a pillar within your industry, a real authority in the market, are starting a new business and you obviously want to call it “John Smith Incorporated.” What happens when you want to retire / go on to another venture / sell your business? What happens when John Smith is no longer in the business? Do the shares still have any value?
Having a strategic plan to coincide with your exit plan will preserve your value for when you are ready to sell! This will ensure you have a clear timeline and you are fully prepared for anything that might come your way.