Exit Strategies 101: The Importance of Planning Ahead

One of the most dreaded questions in job interviews may be this: “Where do you picture yourself in five years?”

But this is the very question that business owners and entrepreneurs need to ask themselves. The people who succeed in this lifestyle have a plan for where they want to be in five years, ten years, fifteen years, and so on. They continue to plan right up to the point that they want to retire. And knowing what you want to do then may be one of the most important things of all.

No one should aim to work forever, no matter how much they love their job. And whether you plan to retire in five years or twenty, you should have at least an idea of what your exit strategy is long before you start implementing it.

If you need to start thinking about your exit strategy, here are some questions to get you started:

What is your goal with this business? Why did you start it?

This is a question that you probably already know the answer to, even if you have never put it into words. No one starts a business or becomes self-employed for no reason.

However, looking at your goals in the context of an exit strategy might change the way that you look at them, and this can affect how you plan the rest of your career. Did you start a business because it felt right for you personally, or because you wanted to make a tangible mark on the world, something that would last?

Neither answer is correct or incorrect — finding self-fulfillment is equally as worthwhile as creating something that outlives you. But being honest about what you really want your work to be will help you as you begin to seriously think about your exit. It will help you answer the tough questions confidently and with the knowledge of why you are doing it.

Do you want your business to continue on after you retire? How?

No one can tell you what the right answer to this question is. This will come down to your own personal preferences, and the goals that you outlined above.

If you do want your business to continue after you retire, who do you want to take it over? Do you want it to be a family business? Do you have an employee that could possibly take over? Or do you want someone on the outside to take things to the next level?

If you do not have an answer to this question at the beginning of your career, that is okay. But you should try to have an idea of where you want your business to go relatively early because it will affect how you run it.

What do you plan to do with it?

Once you have a general idea of what you want your business’s future to look like, it is time to get more specific.

You can sell your business to someone else, for example. Or you can let another business buy it. You can liquidate your assets and let the business end naturally. No matter what you choose, the decision should be based on your more general goals as discussed above.

It is okay if this plan changes and evolves over the years. In fact, you should expect it to, as you grow and mature as a business person. However, beginning the plan early means that updating it will be more manageable or even easy. And when the time comes to begin implementing it, you can do so confidently.

Many businesses that could have continued strong faded and died because the founder did not put a strong exit strategy into place. People have lost money or had to work longer than they wanted to because they did not have a clear idea of how they were going to leave.

You can avoid this by creating an exit strategy early and preparing for it in the years before it actually happens.