Devising an exit strategy might seem like a strange step to take when you’re just launching a business, but forward planning for such an eventuality is an integral part of business preparation.
All businesses need an exit strategy, whether this involves transferring ownership of the company when the current owner decides to retire, dissolving it entirely, or selling the assets to another business. Leaving a business can be stressful, even more so if you’re the founder, and emotions can cloud judgement. An exit strategy ensures that when the time comes you have a plan in place to enable you to rationally take action.
There are a few key steps to formulating every exit strategy. Julie Barber, Founder and CEO of Spark!Consulting designs and delivers workshops for startup founders to create actionable exit strategies.
For this article, Sales for Startups collaborate with Spark! Consulting to share common insights and recommendations for early stage founders devising their exit strategy.
Align your vision
A founder will deal with multiple stakeholders in their business, each with their own individual agendas, it is important to be aware of their interests, understand how they differ from each other and agree on commonality, to create a unified business vision that everyone will support.
It’s always a great exercise to ask each Founder to independently write down what they believe will be the revenue, number of customers and employees in five years? Then share it and see the divergence in thinking between the Founders.
Once you have articulated the vision you need to look at how achievable it is based on data. Work out the metrics you need to track over a period of time. From this, you can then work backwards to define the annual metrics and appoint a champion to keep the vision accountable.
Follow the PPPAT model
The PPPAT model, a business planning model proprietary to Spark! consulting, stands for: people, process, product, assets and technology. Each strand needs to align to the overall business vision. To do this, define a plan of outputs for each strand, focusing on the detail of what you need to achieve within a 12 month period.
- People: Understand who you need to hire next and then implement an in-depth selection process to get the very best talent.
- Process: Every customer needs to be taken on a journey in the sales cycle where progress and incremental customer buy-in can be measured.
- Product: Build a product that the market needs and be able to adapt and develop it as needs change.
- Assets: Creating content without understanding your buyer personas or clarifying your brand’s perspective is not going to achieve your company goals and could be a waste of time.
- Technology: The right technology can help you manage your team properly, boost overall productivity, and ultimately get the most from every project, while saving time and money.
Implement a 90-day operational plan
Once you have the end in mind, you can work backwards setting key actions and allocating the right roles and responsibilities to drive success.
Plan your operations in three phases:
Phase one: Discovery
The discovery phase is all about collating and analysing data, before making any decisions. The founder(s) will need to assess both personal and business details in order to balance them in the business exit planning process.
Collect the following information:
- personal life goals
- a succession plan
- financial goals required to exit
- valuation of the business
- shifting the priorities of previous business plans
You don’t know what you don’t know. So this is the time to consider engaging an expert to help understand what you don’t know and add those things to your objectives.
Phase two: Execution
In this phase, business processes are challenged. Every aspect is questioned and compared to the competition.
Review and update these specific areas:
- write a brand framework that includes vision and mission statements
- business objectives
- align the marketing strategy and sales strategy
- operations management, logistical and personnel
- financial management
- employee engagement
- risks and issues
Phase three: Assessment
The exit strategy is evaluated every 90 days based on the operational plan timeline.
This will highlight any challenges and obstacles that could delay the progress of the exit strategy.
Follow a two step assessment process:
- assess objectives as they were identified in the Discovery Phase
- make a final decision to sell the company or spend more time facilitating
“When I reflect back on my startup journey, only now do I realise the importance of having a clear exit strategy when you start the business rather than when you’re in the weeds of its operation. Often this is spoken about but never taught. You may even design a different business when you have a clear exit strategy.” James Ker-Reid
Every founder will leave their business someday, whether planned or not. In an ideal situation you will choose when you leave and how you will exit your business.
For help defining your exit strategy, please get in touch.