“What is your exit strategy?”, the business consultant asked me. “I make sure all the windows are closed, switch off the lights and set the alarm,” I answered naively.
I had never heard the term exit strategy before and thought it was my plan to leave my premises safe and secure. Quite the opposite actually, it is the strategy put in place to leave my business so that I end up financially safe and secure.
In Stephen Covey’s book, The Seven Habits of Highly Effective People, the second habit listed is: Begin with the end in mind. When you started your business, did you look ahead and think how will I exit this business? How will I receive the value of my blood, sweat and tears as well as retrieve my financial equity in this business?
“Entrepreneurs who run successful businesses have often made themselves indispensable”
There are various options of course: Leave it to your children, sell it to your management staff, sell it to a competitor, or list it on the stock exchange. However, each choice needs a strategy. I had never heard of this concept before that fateful day with the business consultant.
Entrepreneurs who run successful businesses have often made themselves indispensable, and the business relies on them for its success. This is a significant challenge as it means you are your business and that freedom that is often associated with owning your own business, is constantly out of reach, just out of your grasp.
Are you your business?
A larger competitor once approached me when I was in my mid 20s and offered to purchase my business. I was young, arrogant and very proud that they wanted to buy me. Little did I know after assessing my business, that’s exactly what they wanted to do, buy ME. Not my business but me, as I was the business and had not learnt how to develop the necessary systems for my business to operate without me being the key component.
The only approach to exiting from your business successfully is to develop and implement succession planning, or build operational procedures that allow the business to function without you. This is not to say that you should hand over leadership to your management or staff. A fantastic example is franchising whereby trained individuals can duplicate the business successfully through training and highly developed systems and procedures.
Begin with an end in mind
I learnt about exiting a business in 1997 and have not been involved in any business since then without thinking clearly about how I will claim value from this venture, even if that value is far into the future. I am not always successful, and I am unable to deliver on a particular strategy sometimes, but I am always aware “begin with the end in mind”.
Without working towards that exit strategy, creating value for yourself and other shareholders, what are you doing? You are chasing a salary, the same as your staff.
About the author: Stephen Read is the founder and CEO of FIELD an incubator programme working in rural and under-resourced areas including Katlehong, Vosloorus and Thokoza. Stephen is also a life-long entrepreneur and now a teacher.