Escape Hatch

Why now's the time to work on your business exit plan
Magazine Contributor
3 min read

This story appears in the June 2000 issue of Entrepreneur. Subscribe »

When you're doing everything that needs to be done to get a business going, probably the last thing on your mind is how you're going to get out of it. But experts say that should be something you're thinking about from Day One. "You need to know what your ultimate exit plan is," says Ronald Williamson, a partner at Squar, Milner, Reehl & Williamson, a Newport Beach, California, accounting firm. "Having that in place will make your daily business decisions much easier."

Your exit plan doesn't have to be detailed or complicated, but just "a target on the wall, a direction in which you're headed," says Williamson. Do you want to start a business you can sell in five years? Then operate the business in a way that will get you the highest price when the time comes. Are you planning to use the company as a cash machine for a limited period of time then close down? In that case, you won't be concerned about long-term strategies and reinvesting profits.

If your goal is to grow the company and take it public, you'll need a level of professional expertise and management that might not be required in a smaller, private company. If you're building the company to leave to your children, they need to be involved in the operation long before you're ready to turn it over-to be sure they have both the interest and the ability to continue your success.

You may plan to be involved with the company indefinitely, Williamson says, but your daily decision-making in such areas as staffing, financing, marketing, etc., will be more effective if it's done with your long-term strategy in mind. Investors will be interested in your exit plan to see how they're going to get their investment back with an adequate return on it.

Your exit strategy should be part of your business plan-and, like the rest of your plan, it's subject to change. Your kids may decide they don't want the company, so you might sell it to the employees instead. Or you may change your mind about going public. "Things may not play out the way you expect," Williamson says. "But that shouldn't preclude you from creating an exit plan, because it helps you run your company from the start."

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