“The challenge that business owners often face in this respect is comparable to the difficulty that many new parents have with imagining their children grown up and leaving for university. Imagine, however, if parents did not plan ahead for the cost of their education - that would be detrimental to the future of their children.
The same could be the case for your business.
“The lack of an exit strategy could be telling of a fundamental lack of measurable business goals and this needs to be addressed.”
From immediate liquidation to liquidation over time; family succession; selling to staff or external investors; the open market or another business; or the gruelling but profitable exercise of taking your company public - there are many ways in which an entrepreneur can exit their business. Mjadu said whatever the process, a strong and solid strategy was essential.
The five key points of a good exit strategy are:
1. It tells you when you are done. Mjadu said a good exit strategy should reflect a core understanding of all the intricacies of your business and be able to tell you when the life cycle of your business (or your involvement in the business) should come to an end.
This is usually done by including a set of tangible measurables or objectives so that it is easy to ascertain when these have been achieved.
2. It sets out the right environment within which to exit. A good exit strategy considers the economic, social and political environment at the time of your exit. Mjadu said this was important to plan for a secure financial future.
3. It compensates those who contributed to the life of your business. It was important to consider the impact your exit could have on investors and staff, said Mjadu.
4. It compensates you. Mjadu said entrepreneurs often struggled to recognise their own true worth, especially when this involves attaching a monetary value to what has been achieved.
5. It sustains your entrepreneurial drive. Mjadu said while you may be nearing the end of one journey, your exit should enable you to continue to be an entrepreneur - and to look forward to the next journey.
Exiting your business should allow you a good retrospective look at what you have done over the years - and so planning the strategy early on will set you up in regards to what you hope to achieve. “Upon exit, you should be able to say that you have done what you set out to do, financially and socially, and you have some energy left to do more elsewhere,” Mjadu said.
Supplied / PERSONAL FINANCE