I’ve written a number of blogs about becoming an entrepreneur. One of the key points about entrepreneurship is determining what your business strategy is and what your goals are. Does your strategy help you achieve those goals? Do you have an exit strategy?
When you’re starting and running your company, you should have an idea of what your end goals are and what your exit strategy may be. For many entrepreneurs, we are not interested in running a company for the long term but just getting them up and running, figured out, and off to the races. Those of us in this category are serial entrepreneurs. I discussed the option of the quick win which may be what you’re looking for.
On the other hand, some of us want to grow the business as a means to an end and thus you need to set goals to get you where you want to go. How long do you want to build this company? What is the potential of the business? How do you avoid selling too early?
Some strategy I have learned through education and from some of my mentors is to look at why you are developing this business. Some people are perfectly happy shrugging off their exit strategy and building a lifestyle company. These companies are profitable but instead of investing the profits, the owner takes the lion’s share of the profit and lives rather comfortably. In order to better understand where you want to go, I use the following questions to formulate my exit strategy.
- What type of business do I want to build?
- Do you want a lifestyle company that is sustainable, a fast grower that will sell quickly, or a growth company you will continue to work in? Each type of company will contain a different strategy and identifying it up front will help you in the long run.
- What do I want to earn from this business?
- Many times, we are shy about saying we want to earn a profit but we must remember that is why we are in business in the first place. We want to make money and you need to set a goal for what you want to earn from your business if it is a lifestyle company, what you want to sell it for, or what net value you want to grow it to.
- How long do you want to be in this business?
- I think this is one of the most overlooked questions when entrepreneurs begin a business. So often we are so focused on getting to the finish line and making our product successful that we loose track of time. You must put some sort of timeframe on the goals you want to achieve otherwise you may take forever getting there.
- How do you know when it’s time to sell without selling too soon?
- This is one of the most difficult questions that cannot be answered with a simple “sell now” technique. Your selling point will be based on many criteria. In my opinion, set your goal and when you achieve your goal, you should be comfortable selling the business. However, some businesses have so much momentum you may want to re-evaluate where you are headed and if you should hand the business over now or later. One thing to remember, however, is that it’s good to sell a business that has momentum as the market will see it and it will be an attractive purchase. If you wait too long, and momentum has declined, it may be more difficult to sell and you may have missed your opportunity to achieve your desired price.
- Overall, if you understand your business and set some goals, you should be able to target your selling point more accurately.
If you’ve sold a business, please leave a comment and let us know what your exit strategy was and how you knew you had achieved your goals!