My guess is ... most entrepreneurs don't go into solo business with the exit door in mind.
Why would they? Entrepreneurs are frantically focusing on starting and growing a business and the last thing they spend time worrying about is how to get out of their business when they are done with it.
Simply put, an exit strategy is a game plan of sorts. It's a thoughtful plan for going out of business.
Why would a business owner want a plan for going out of business?
For some profitable businesses, at least, an exit strategy can include realizing a significant profit above and beyond the revenue that comes from daily operations.
As a solo operator, wouldn't it be important to "collect" or receive payment on the sale of your business that you had created, grew, nurtured, and monetized over a significant number of years?
Regardless of your desire to build and never sell your business, there may come a time in the future when you want or need to turn this asset into cash.
Even if you hand the business down to children or other relatives, they may not have the same desire you did to run the business. They may not want to spend their lives as you did.
Though you may not hear a lot about exit strategies, buy-outs, and the sale of businesses on the nightly news, they are quite common place in the business world - especially with smaller high growth businesses.
You see, investors put money into companies in order to realize a return on their participation. Often that return isn't realized until the company makes significant income or it is sold and the investors are paid off.
Some call this exit plan in a family business a "plan for succession."
The succession plan answers the following questions:
1. Who will own the company when it is passed down to heirs at the retirement or death of the current owner?
2. What accounts receivable or investments will accompany the business?
3. What income will be available to the business and where will it come from?
4. What amount of income is expected by the original owner and how will it be taken (monthly, yearly, a lump sum)?
5. Who will be responsible for outstanding debts and accounts payable, the original or new owners?
6. Will the new owners be expected to purchase assets of the original company?
7. What will be the disposition of intellectual property, patents, trademarks and other intangible assets?
In the corporate world, exit plans typically lead to one of the following: (a) a merger with another company, (b) a buyout by one or more of the interested company shareholders, (c) an IPO (initial public offering) where shares of stock in the company are sold to the public and then traded on the exchanges, (d) an outright sale of the company and all its assets and liabilities to another person, a company, or group, or (e) the creation of a franchise where the business is replicated in multiple locations.
The form that the exit strategy takes will depend largely upon the worth of the company at the time of exit, the desire of the original owner as to whether the business stays in the family or not, the potential to identify and cultivate potential business buyers from either current investors or the public, and the needs of the original owner for an income stream or lump sum payments.
Thinking about all these questions and variables at the time of business creation is a sound strategy. Some businesses are specifically created with a 3 to 5 year exit strategy window. Serial entrepreneurs are very good at creating, growing, then quickly selling (flipping) a business for fast and maximum profit.
