Entrpreneurs Share: Why All Businesses Need an Exit Strategy

Exit strategy
Plan from the outset where you want your business to go.

Perhaps to some it sounds a little pessimistic to talk about having an exit strategy for a business you haven’t yet started, however, an exit strategy is actually a very wise move. We talk all about the things you need to consider when starting a business in our Small Business Management Course, but of equal importance is how you’ll end the business, which is something you need to consider when writing your Business Plan.

How Will You End It All?

Knowing how you’ll exit your business when the time comes will determine a framework for how you’ll set up your business up in the first place. This could involve creating a name for your business, rather than using your own name, so that you can sell your business later without having to relinquish your right to use your own name.

Exit strategies have never been more important than they are today when it’s not uncommon for a start-up to be sold maybe two or three years after its inception. Take Flickr, the image hosting website, as an example of case in point; it was only 18 months old when it was sold to Yahoo! for $30 million in 2005.

Three Key Reasons to Have an Exit Strategy

We spoke to our network of fellow entrepreneurs and business owners recently, and they gave us three reasons every business should have an exit strategy.

1.    It gives you a roadmap: Mark Darling of Sip Water says: “Begin with the end in mind.” Operating a business without an exit strategy is like going on a road trip without taking a map. “How are you going to get there if you don’t know where there is?” The smaller things tend to fall into place much more easily when the bigger things have been decided.

2.    It’s motivating: “When you’re working towards a specific goal, it really helps you to stay motivated on those days when everything seems to be going wrong,” says Vic Cherikoff of Australian Functional Foods. Your exit strategy helps you to put certain problems in perspective.

3.   Get the best sale price: “Knowing when and how you will sell your business can help you think about what you need to do to maximise your business’s value,” explains Robert Crane of CIA OPS. Without an exit strategy, you may find yourself accepting fire sale prices just because you want to exit your business quickly. Having an exit strategy helps you avoid this.

Having an exit strategy is just as important as having a start-up strategy. But that doesn’t mean you have to follow it down to the letter. Like most things in life, often the best-laid plans don’t actually go to plan, but having a framework to work off will help to make your business more successful and ultimately, more profitable in the long run.

You can find out more about writing a business plan in our Small Business Management Course by clicking here.

Interview with Business Owner: The Benefits of Being “Hands On”

We interview Mark Darling about some of the keys to his hugely successful water business.
We interview Mark Darling about some of the keys to his hugely successful water business.

We recently wrote about the five attributes successful entrepreneurs possess, but one attribute that wasn’t on that list was being hands-on. Our Small Business Management course teaches students all the practical, hands-on skills you need to successfully start and operate a new business, but that hands-on attitude shouldn’t dissipate once your business is up and running.

Why It Pays to Be ‘Hands On’

With that in mind, we recently spoke to Mark Darling, the chief executive officer of Sip Water, a Sydney-based bottled water business, about why business owners should always be hands-on with their businesses. Mark’s history with the bottled water industry has been a long and storied one, but ultimately it’s been about success.

For many years, Mark operated his first bottled water business almost like it was still a small business even though it had grown to become the second largest bottled water company in Australia, behind Neverfail. Even as the large-scale operation that it had become, it was not uncommon for Mark to carry out many of the duties typically not expected of a managing director, like making deliveries to clients.

Eventually Mark’s business caught the attention of another publicly listed company to whom Mark eventually sold it; it was some several years later, that Mark decided to start Sip Water, this time a much smaller operation where Mark still makes water deliveries to his clients to this day.

Why Do What You Can Pay Others to Do?

The reason Mark still makes deliveries: because it makes his business more efficient, and his hands-on approach is something he attributes to the success of all of his businesses. “People often ask me ‘Why don’t you get someone to help you?’” Mark says. “But I always say ‘Well, why would I do that when I don’t need one.’”

Mark says that many business owners often feel they should employ someone to perform work they could really do themselves. “I’m sure it seems unusual for a CEO to make deliveries, but I do it because, this way, I know it’s been done,” Mark explains.

Perhaps this contradicts everything you thought you knew about business, particularly since its often drummed into business owners that in order to prosper they need to delegate; to step away from the smaller things so they can concentrate on the big things.

On this, Mark agrees, but adds: “If I can fit some deliveries into my day without it impacting on the other things I need to do, I will.” The idea is to only hire personnel that are absolutely essential to the running of the business. This keeps your overheads down and your profits up.

Rather than employing an admin person for your business because you feel that as the owner you shouldn’t be doing admin work, ask yourself whether you can conceivably do the admin. If you can, why hire an admin person?

Often people believe that the larger your team, the more professional your business will seem; the more it will seem like a big business. But some big businesses are like icebergs: they appear a certain way on the surface, but it’s what lurks beneath the surface you need to worry about.

In the case of Mark’s original bottled water business, not long after selling it to a well-known, publicly-listed company — or big business — the core company which purchased it went out of business, taking the business Mark had built down with it.

The Moral Is…

The moral of the story, as Mark sees it, is that his attitude towards running his businesses is right: if you’re hands-on with your business and you know what’s happening with it, then you’ll avoid the calamities that often engulf other businesses: closure due to poor management.

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Our Small Business Management Course teaches students everything they need to know about successfully starting and operating a small business, including payroll, financial planning, and the like. To see our full suite of training courses, click here.