A Guide to Creating an Exit Strategy for Business
Whether you have an online business or work offline, all businesses need to have an exit strategy. There are different types of exit strategies available and you need to determine the right one for the business. This will depend on a number of factors, including whether you are creating the business purely for the money or whether this is something that you want to pass onto someone at a later date.
The Exit Strategy Will Determine the Way the Business Is Run
Your exit strategy will directly affect the way that you run your business. It will determine if you enter the stock market or not, whether you employee a large number of people and the type of products or services that you offer. For example, if you plan to leave your business to family members, you will need products or services that will be useful in the years to come; you will want something that is easily adapted to suit the future generations.
The Strategy Will Determine Profit
It will determine how you spend your profit and whether you put it back into the business. Do you want to grow your business or are you in it for the financial gain? Those who want the lifestyle of the business want the flashy cars and the million dollar houses will find that their exit strategy is to sell it on afterwards. This means putting as little profit into the business and taking it for you by paying yourself a larger wage.
If you want the business to grow, you will need to place the profit back into the business. You will need to create budgets to help make sure there is a profit each year and that it is spent wisely. This will mean sacrificing some of your salary for this to work but is a great option for those who consider leaving the business to family or close friends afterwards.
If you want to sell the business on, you will need to make sure that the profits go into the company. Businesses that are doing well are worth much more than businesses that are struggling. The buyer will not have to do as much to help keep the business afloat and will not risk as much.
The Exit Strategy Will Help Develop Training
Do you want to leave the business to a family member? You will need to train a family member to understand the workings of your business, the type of service you want to offer and the clients or customers that you have. This will help to keep the name of your business in good standing. If you have no family, or no one interested, you could leave it to a friend or someone within the business that you trust and wants to take over. You will need to train them to make sure they understand everything about the workings of the business and not just the role that they do.
An exit strategy will tell you how you want to end the business, so you will know the steps to take while running it. If you want the business lifestyle and are willing to let it go afterwards, there is the option of paying you a higher salary instead of putting the profits into the business. However, if you want a business that you can leave to someone, you will need to consider the training, how to spend the money and how the business will be run to prepare for the strategy.
Author bio:
This guest post was written by Pamela, a business owner. As well as running her own business, she offers tips for others in handling their businesses, especially dealing with exit strategies, mergers and acquisitions.
Category: Business
