Opinions expressed by Entrepreneur contributors are their own.
When creating an exit strategy, you want to look at more than the overarching concept of selling your business. You also have to consider the nuance surrounding the size and type of business you’re operating and the industry you’re in. Every business is different, and the exit strategy for someone creating a tech startup will look different from that for someone operating an insurance company or a business that sells products globally.
The exit strategy expresses the individual’s needs and wants and what’s suitable for a company moving on without them. Considering the correct variables, you can tailor your exit strategy, optimize your company’s value and ensure a smooth transition. Here’s how to develop or adjust your exit strategy so it works for your business and the future goals you have in mind on a personal level. Then, you can move on to your next venture more easily.
Related: Exit Strategy Through the Eyes of an Angel Investor
Consider the size and type of your business
The kind of business you’re operating and how large that business is both matter when formulating your exit strategy. That’s because different types and sizes of businesses vary significantly in how they’re sold and the kinds of potential buyers interested in them. If you’ve been running a mom-and-pop retail store in your hometown, moving on from that will be handled differently from heading up a large corporation offering IT services, for example.
Exit strategies are also essential for anyone creating startups, selling them, and moving on to the next venture. If you plan to avoid being involved with your business for the long term, you want to know from the beginning how you will move past getting it up and running so you can focus on the following plan or goal. In that case, you can tailor an exit strategy that works with each business you create, provided they’re the same essential kind of business and similar in size.
The industry you are in matters.
Along with the size of your business and what kind it is, your industry also matters. It’s fine to be unique and even highly valuable sometimes, but most industries have specifics for handling things. There are expectations to meet, and it’s easier to hand your company off to someone else if you’re meeting those expectations.
That shows you understand how your industry works, and that’s very important when exiting a startup or other business. The person or company taking over wants to know that you understand your industry and how to create a viable business in that space. When you follow established or standard protocols for your exit strategy, that’s a green flag to potential investors and buyers.
Some up-and-coming entrepreneurs may be explicitly looking for something unique, and they can be highly interested in a business that’s “outside the norm” for its industry. But that is not the case for most companies or industries, and you may not be taken seriously if you refuse to conform to at least your industry’s overarching, basic standards. You would not want your desire to be unique to stop you from forming or completing your exit strategy.
Related: Every Business Owner Needs an Exit Plan — It’s Time You Develop Yours.
Optimizing your value makes for a smooth exit.
Optimizing the value of your business can give you a better strategy and an easier exit. You need to know what your business is worth based on the current state of your industry. When you have that knowledge, you have negotiating power and can potentially realize more gains during the sale of your business. Being realistic and informed goes a long way when passing the torch to someone else.
Ideally, your exit strategy should be part of your company’s creation so you know what steps to take and how to move it along. Then you have a goal to work toward and can look ahead to the next business after this one is at the right point for you to exit it and focus on the next goal. You want to avoid getting stuck in a position you aren’t looking for because you need to figure out how to get out, so make your exit strategy an integral part of the planning right from the beginning.
Remember that an exit strategy should be tailored to you.
While there are some caveats about industry and other factors, your exit strategy should be focused on your plans and goals for the future. Some people want to get things running and then leave for other endeavors, while others might want to stay on for a while and get something else started before they move on. Both options are viable and valid, and it is up to you to consider all the variables that might affect your decision. Then, you can choose wisely before moving forward.
In that sense, there’s no right or wrong way to build your exit strategy as long as you understand and meet any basic requirements or expectations that allow you to exit the business. You want to make your company viable to others so you can sell and move to something else when you plan to. If you have a more unique proposition, you must show buyers how it can benefit them. Other than that, though, your exit strategy can (and should) be your own.
