You're not ready to retire, nor are you considering selling your company-in fact, you see yourself running your venture for years to come. So why bother with an exit strategy? For the same reason your mother always nagged you about wearing clean underwear: You just never know what might happen. You may, for example, get an unexpected offer from someone who wants to buy all or part of the company, or you might experience unforeseen personal circumstances, such as illness or divorce, that could change your plans.
A solid exit strategy ensures that your company continues after you're gone, eases the transition, protects the business's goodwill and assets as well as the interest of investors and creditors, defines ownership of intellectual property, and keeps your tax obligation as low as possible, says Kathy Teel, president of The Compliance Company in Oklahoma City, Oklahoma.
Perhaps the most critical part of an exit strategy is relationship planning, Teel says. More than basic succession planning, you need to be sure your company will be able to draw on the alliances you've built with investors, financiers, customers and employees if you're not there. Be sure the people you're grooming for leadership roles have made those connections.
Another point to remember is any transfer of ownership will include a complete audit. "An exit strategy should always include preparation for a merger-and-acquisition audit," Teel says. "There should be some [routine] self-auditing going on to make sure the business integrity is where it needs to be in terms of legal compliance issues and properly documented intellectual property."
Keep the emotional aspects of the transition in mind, too. "Every executive ought to give some thought as to how they would feel about a purchase of their company," says Teel. Would you be willing to stay and help with the transition, and, if so, what compensation would you want? Could you deal with a buyer who wanted you to just pack up and get out? "You need to be emotionally ready for the fact that you're separating from your 'baby,' " says Teel.
Even if you don't need to use your exit strategy, the process of putting it together and keeping it current clarifies your vision and makes your company stronger.
Jacquelyn Lynn left the corporate world more than 14 years ago and has been writing about business and management from her home office in Winter Park, Florida, ever since.
- The Compliance Company LLC, (888) 280-8342, www.thecompliancecompany.com