Always Begin with the End in Mind - Business Exit Strategies

I put Stephen Covey's picture on this blog article not only because he is one of my favourite authors but because a lot of what he has written about applies to starting businesses as much as it does personal management and change. In particular his concept of "Begin with the End in Mind".

I think for a lot of new businesses they miss this point and it is a really important one.

What do you want to get out of starting your own business? Why a new business?

There are a lot of reasons why people start their own business such as...

- they want to make lots of money (define lots?);

- they want to be their own boss;

- they feel really passionate about their business idea;

- they want to "change" the world;

- Other ; and

- "All of the above".

Point being before you start a business you should have a good idea of why and all your business partners or investors (if you are going to have them) or interested parties (e.g. Spouse, Girlfriend) should have the same idea. Because if you are not on the same page with all these people you are setting yourself up for a lot of confrontation. Starting a business is a tough thing to do and when the going gets tough your don't want to find out your business partner or key investor wants a different thing than you.

Because it is this question " What do you want to get out of starting your own business ?" that will then help you answer your next question which "What is your exit strategy?" Because trust me you want to have this figured out before you start a business.

What is your Exit Strategy?

So there are lots of ways to exit a business...

- Initial Public Offering (IPO) ... although this is only common in larger businesses due to cost and effort;

- Selling the entire business to someone else... sometimes tough to do unless you have a target buyer selected before you start. You also need your business to be a certain size (big or small) to attract a certain demographic of buyer;

- Selling the component parts of the business... easier to do but you'll get less money for them; or

- Simply winding it down. Maybe your business is about lifestyle and and lifestyle finishes when you retire?

There is nothing wrong with any of these options. They all have their pros and cons. It's just a question of what is right for you? Because if you have a certain exit strategy then there is a lot you can be doing now to set your business up for that strategy (this will be the subject of another blog article).

Part of of picking an exist strategy is figuring out when do you want to exit?

Do you want to exit when you've made a certain amount of money? Or after a certain time frame? Or when you have achieved certain goals? Or do you plan to exit when you die? :) All perfectly valid options.

It may sound basic...

....but answering these three basic questions...

1) What do I want to get our of starting a new business?

2) What is your exist strategy?

3) When do you want to exit?

... up front will prevent a lot of heart ache later on and make you much happier in your new business endeavors.

Because as Stephen Covey pointed how will you ever get to where you want to go if you don't know where you are going?

More importantly and trust me when I say I have seen huge amounts of stress and arguments are created for new business owners when they haven't been clear from the outset with themselves and all their interested parties (partners, investors, spouses) about what the answer to these three little questions will be.