White exit sign with arrow on concrete floor

Business Exit Strategy

Exit strategies are not just for when you’re employed by another company. Exit strategies should be part of your overall plan when starting a business. A good exit strategy will help you have enough money to pay creditors, maintain good relationships and establish new ones and help you prepare for the unexpected. You should know the answers to what you plan to do in case of an unexpected downturn in the market, a natural disaster, a bad product launch, bad PR and/or misconduct. As you’re starting up your business, there are a few questions you need to ask yourself.

Will you have enough capital on hand to maintain the business while you are liquidating the business assets? It is important to know you have enough reserve cash/credit available to help you if you need to make a quick and unexpected exit from your business. You may also have to pay fines and other expenses. Inventory products that you know will liquidate quickly and those that will depreciate over time. You should have a good understanding of your assets and the risks involved if you liquidate them too quickly and/or don’t follow the rules for liquidating assets.

Have you figured out your assets’ values and overhead costs? The assets accumulated over time will have a different value than newer assets. When planning an exit strategy, you should consider both the productions costs and how you’ll recoup them (if possible); property costs including equipment and maintenance costs and employee costs. Employee costs should be incorporated if you are starting with paid employees that expect to receive unemployment insurance (UI). Failing to consider these costs will hurt your reputation as well as make it harder to start another business.

What, if anything, are you going to do to make the transition as smooth as possible? When you are starting a business, you need to be prepared for a variety of situations. Just like you plan to promote your business to make people aware that you are open and ready for business, you should also plan to make people aware that you are transitioning to another business or retiring. A good exit strategy would let your customers know where to get your product/service when you leave, have a way for your customers to redeem any last minute coupons, advertise and thank your loyal customers for their business.

You should definitely keep communication open, involve your employees and plan for the unexpected to happen. A good exit strategy should.

  1. Have clear communication – be honest and open
  2. Reserve cash/bonds-Should set this up as a separate account/emergency fund
  3. A way for you to connect with customers and suppliers – current inventory of products
  4. Help your employees’ training programs and unemployment insurance

You should always have a way to get out of a bad business proposition. Good exit strategies take into account that human beings sometimes make mistakes and allow you to save face.

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Jonah Engler

Former Stock Broker and Financial Expert, Jonah Engler is a New York City based entrepreneur who writes about entrepreneurship, investing, public relations, and other topics that fascinate him. Engler explores Entrepreneurship through his Mobile Phone Franchises in the NYC area.