What is the best time for entrepreneurs to prepare an exit strategy? Why then?
These answers are provided by Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most successful young entrepreneurs. YEC members represent nearly every industry, generate billions of dollars in revenue each year and have created tens of thousands of jobs. Learn more at yec.co.
1. As Soon as You Know You’re Starting a Business
Contingency planning is a must for the business. An exit plan is imperative as soon as you conceptualize your business. It prevents your company from falling into a state of frenzied panic as soon as things go downhill. While this doesn’t imply that you start working on your project with a negative outlook, extra preparedness never hurts. This strategy also needs to evolve as your business grows.
2. When You See Extreme Financial Gains or Losses
Extreme financial gains and losses are the perfect time to create an exit strategy. If your business is doing well, you may want to merge or sell your business to a competitor for a generous profit. This strategy can help fund your next endeavor. On the other hand, if you’re noticing consistent losses, you may want to consider coming up with an exit strategy so you can minimize your losses.
3. During the Time of Your Best Performance
The best time to plan an exit strategy is at the time of your best performance. This is when you can scope your future the best. Identify the goals you’ve achieved and the value you want to create with your business. If your evaluation suggests that you have already created the value you aimed for at the beginning of your journey, it’s time to gradually plan and execute your exit strategy.
4. After a Valuation
A great time to start putting together your exit strategy is after a valuation. It seems that this is the best time because you have a tangible idea of what your business is worth. You can use this data to determine if you should sell out, prepare for losses, or stick around and see if there is more room for growth before you leave.
5. When You Have No Interest in Adding Value
Do you wonder why Amazon stock keeps going sky-high? Because they constantly add new products and services to help every aspect of customers’ life. Companies that have made no improvements lose their clients. Therefore, prepare your exit when you have no interest in adding value to your customers. Once people get dissatisfied, they will leave, and your brand will be worth less and less.
6. Six to 12 Months Before You Want to Leave the Business
When you’ve decided it’s time to walk away from your business, you want to give yourself enough lead time to get your affairs in order and ensure the most fluid transition possible. However, you don’t want to give yourself too much lead time to where you can get second thoughts. Hence, I recommend organizing an exit strategy somewhere between six months to a full year before your actual departure.
7. On an Ongoing Basis
You should always have somewhat of a base exit strategy ready to go since you never know what may happen, and you don’t want to be struggling to put one together when the time comes. Some parts will be based on the most recent valuation of the company, so be ready to update your strategy as often as possible. Having an exit plan doesn’t mean you’re leaving now, but it’s good to have one.
– Andrew Saladino, Kitchen Cabinet Kings
8. Right Now
If you don’t have an exit strategy for your business, start preparing one now. When a business has an exit strategy in place, it’s more likely to see growth at a faster pace because you’ll work hard to ensure streamlined business operations and a return on investment. Preparing an exit strategy not only prepares you for the future but helps improve your business overall.