The Importance Of An EXIT PLAN For Your Business

Many people go into a business without considering a plan for going out of that business. This can lead to anxiety, fear and lost time on projects that maybe great for somebody else, but not workable for you.

Some people stay too long in a business when they could have moved on long ago to something more exciting and more inline with their new skill set acquired from their tired old business.

And some simply lose money as they never knew when to stop investing. They either lose most or all of their savings or otherwise accrue a big debt when there wasn’t a need to ever do so.

So the need to have an exit plan is often overlooked as you the business owner doesn’t want to look like you’re having problems or that you’re in over your head.

Before you start – work out where you will end.

Stop Loss – in my days as a currency and index trader the term “stop loss order” was used where you can place a pre-set limit to your day’s trading and have a fixed stop in the market. If the market traded past this point, you were stopped out and your losses were limited only to the price point. Thus if you knew that the amount you were going to lose was $X dollars it was easier to calculate your trading and not let your greed, fear or forgetfulness get the better of you.

Opportunity Cost – in business like in life if you are doing one activity you are not making money on another activity you could have done at the same time. Thus if your business isn’t making you $X dollars a week or month by xyz month of the year, you will pull out and move your attentions to a more profitable activity. After all why flog a dead horse?

How much will it cost in real terms to achieve ‘xyz goal’? – A lot of new business owners see only the bright side of the coin, we are often shunned from looking at a devil’s advocate position. RISK ANALYSIS in the self-employed world is often mistaken as “negative thinking” and I call it stupidity to ignore it. To not consider all sides of the coin is to be ignorant of reality. Even a simple SWOT (strengths, weaknesses, opportunities, and threats) test of a business idea and your own personal financial situation as it really is alongside it needs to be looked at carefully.

Planning the sale of your business – before you even start, think now of what you need to make an effective sale of the business sometime down the track. The average business takes at least 8 months to sell and usually about 6% of businesses listed with a business broker will sell. Make sure you keep your paperwork handy and your business trademarks, employee agreements, rental and leases, supplier agreements and anything else that matters ready.

Most people when they sell a business have very inflated ideas about what they will get. They forget that even getting a prospective buyer is extremely hard and that on average they will get at least 25% to 50% of what they ask for at time of sale especially if your business has no real estate or solid cash flow backing. Have a consultation with a business broker early so you know where you stand.

Don’t leave it too long to sell your business – most business owners are so used to their routines that when they try to sell it often 5 years too late. You should be thinking of when to sell or leave inside the first month you either start or buy a business.

Planning to retire from your business – do you have a “succession plan” for your business if you want to retire or if you have an accident and can no longer run the business? You need a backup plan for those events. You may even wish to sell to your competitor; it’s a very easy way to escape your business fast.

Planning to close up shop – even if you simply wish to close up shop and walk away, have a checklist for doing just that. Make sure all your affairs are in order so you don’t get bothered by details long after you walk away.

Planning to sell your IP (Intellectual Property) – selling your brains could be that you write a book, or run a mentoring business for other new business owners that join your industry. This way you can still get paid while not actually running a business directly in that industry area niche.

For example, I had run singles events businesses for about 20 years before moving onto starting my writing and authoring business. Before I left running my singles events business I wrote 7 detailed books on almost every facet of what I used to do and passed on my knowledge to other up and coming business owners. Those books still sell each week, so I feel very happy I’ve been able to pass on my experience to others worldwide.

David Newton runs social and business events in both Sydney and Melbourne see his sites: BabyBoomersRights and Baby-Boomers-Melbourne plus www.MelbourneWalking.com plus www.The7StepsAuthor.com attend his regular events and meet new people.