Why Exit Strategies are Important for Entrepreneurs

Entrepreneurs are creating an entity that is their own. These entities are nurtured, developed, and when the time comes, they will be exited. An exit is often overlooked by entrepreneurs because they don’t think that far ahead in the future.

Owners are too busy trying to make the business grow and earn revenue to think of an exit.

But it’s one of the most important times in a business’ journey.

What is an Exit Strategy?

Exit strategies are when a business achieves its highest goals. This can be:

  • Owners taking a lesser role in the business
  • Passing the business on to heirs
  • Retiring
  • Sale of the business

Many tech companies have started and sold their business with the key goal of exiting, being paid a substantial sum for their entity by a larger corporation.

Exit strategies help businesses plan for the future, and in many cases, they’re able to forge the future of business decisions. A business may decide to take different approaches to their business just because they are planning on an exit.

Taking an aggressive approach may be an option when an entrepreneur is chasing growth with the intent of exiting.

“Strategic acquisitions offer the greatest liquidity in a short time-frame. However, market conditions impact the appeal of various types of exit strategies,” explains the Law Offices of Marc J. Blumenthal, Ltd..

When a business has an exit strategy, it offers numerous benefits.

Exit Strategy Benefits

Exit strategies offer a lot of benefits, and this is one of the key important reasons why businesses develop an exit strategy. A few of the benefits that a strategy offer is:

  • Business interests and value are protected
  • Potential income is generated in the event of a disability or retirement
  • Future worth of the business is enhanced
  • Tax impacts and implications can be reduced or deferred for family members
  • Direction of the business is created in a strategic manner

An exit is important because you will be exiting the business at some point. Even if your exit only comes upon death, you will still be exiting the business.

Planning for the future is going to make your exit easier, allowing your hard work to last after you’ve left.

Business strategies often provide direction for a business, and this direction can be:

  • A blueprint for success, including a timetable and the ability to chart your success.
  • Decision-making strategies that allow for long-term success.
  • Value of the business and how to enhance value in the relative term.

When creating an exit strategy, you’ll also be developing your personal goals. Perhaps you want to exit into an IPO, or bring the company public. You may also want to create a business where you’ve trained your son or daughter to take over when you retire, continuing the family business.

Conditions of an exit should also exist, and these are triggers that say, “hey, it’s time to exit the business as per the plan.”

Realistic valuations, which occur periodically, will also exist and allow you to determine the true value of the business and how it may have increased or dropped over time.