Let’s face it, you know that there will be a time when you’re going to have to leave your business behind and pass it on to a new owner. But in doing so, you should also keep in mind that your financial status should be a big consideration.
If you exit the business, would you have an income that you can rely on to live normally? This is especially true if you’re making an exit because you’re nearing retirement age. Making a solid retirement plan extremely necessary.
If you’re planning a good exit, not because of retirement, it could be because you want to try new things aside from this current entrepreneur venture you’re in. Even if that’s the case, you should still have an exit plan that considers both the sake of the business after you leave and your own finances.
What should be the main basis of your exit plan?
When making any sort of plan, especially one that involves the fate of something you’ve spent money on and worked hard for, it’s essential to make foundations that will be the beginning of a good exit plan, such as:
- The length of your involvement in the business
- The financial goals you set for yourself
- The existence of debt incurred by the business
The amount of time you’ve been working in the business you’re planning to exit from is an important aspect of the exit strategy because your exit could affect the business’s ability to perform. If you’ve worked there long enough to create an organization that depends mostly on the work you do, it’s a good thing to start preparing people who can take over your place when you leave.
Another factor to consider when curating a plan is your own financial goals. This is important if you rely on the business as a source of income that you use for your daily life and other necessities. Will leaving the business mean you lose your income? Answering this question should give you more insight on the right time to leave the business or if you should consider another way out.
The next thing would be to make sure the business can pay off all creditors or investors it owes money to. Some investors may not be willing to continue putting their money on a business that will have a change as major as an owner leaving. Ensure that your exit is clean—without any pending debt that can hurt the business in the future.
What are the steps in creating a plan?
After you’ve done the right amount of assessment regarding your involvement, finances, and the business’s financial standing, it’s time to create an exit plan based on the data you’ve gathered.
Keep in mind that leaving a business—especially if you created it—isn’t an easy thing to do. You might have times when you’d just prefer to stay rather than leave the business in a position where its future can be thrown into a pit of uncertainty.
But in creating an exit strategy, a good thing to do is to see it as the times you were just planning your entry. Think of the future and how you want your business to be.
To guide you, here six steps you should take note of:
1. Get your finances ready
Assess your current financial standing and see if exiting the business is the right move for your financial goals. We’ve stated previously that if the business you’re planning to leave is a source of income, you should consider how you can still make money after the exit or pick a good timing.
2. See if you have other options
After gaining a good view of your own finances, prepare, and review other plans you can exit the business without putting your finances at risk. If you come up with a conclusion that delaying the exit is better, you might want to look into that.
3. Discuss the exit with your investors
In doing any major business move, your investors and other key stakeholders should be consulted before execution. They have the right to know about the future of their money that’s on your business. They might want to be repaid or continue investing depending on the business’s perceived future after you exit.
4. Pick a new leader
If your involvement is as big as one of a leader’s, it’s only right that you train someone who can take your place. The last thing you want, and your investors want, is to have a gaping hole in the leader’s seat because you failed to designate a new one.
5. Inform your employees
Telling your employees about your exit is a good way to prepare them. From here, you can pick someone from your team that you trust can take after your work.
6. Let your customers know
This will help the business’s future. The lasting you want is for the business to tumble down because they’re not pleased with the new management. Letting them know that there will be a change in the roster of people running the business, but the same quality of services will remain.