I know first-hand that having an exit strategy is not popular among small businesses in Nigeria.
A good number of small business owners don’t know what it is or why they need it.
Especially as they don’t have any plans of selling or exiting their businesses in any other form.
So, why should they bother?
First off, an exit strategy is a plan to sell or transfer ownership of the business to another business, individuals or investors.
It is a plan the business owner(s) put in place at the start of the business, where conditions are set for the business owner to give up control, ownership of the business.
There are so many reasons why every small business owner should have an exit strategy.
We’ve shared a few of these below:
Four (4) Reasons Your Small Business Needs An Exit Strategy
1. It Provides Strategic Direction For Your Business
An exit strategy sets a goal your small business aims to achieve sometime in the future.
It helps the business owner to visualize what the business would be like in the future.
Such clarity helps the business easily determine what it needs today to achieve its goal of the future.
The business can make hire people, build relationships that align with their desired exit plan.
2. Smooth Transition
Transferring control or ownership of a business from one team or individuals to another is usually a difficult period for any business.
Without an exit strategy to provide guidance, business activities would be disrupted, customers may be lost and much more due to the chaos.
Drafting an exit plan for your small business before it is necessary would ensure that the operations or ownership of the business can be transferred to a new team without affecting the business negatively.
Many small businesses fail after the death of the founder because management by default is transferred to family members.
A proper exit strategy would ensure that business owners consider the skills and experience necessary to operate the business and ensure that the right person takes over after they’re gone.
3. Protection Against Unforeseen Circumstances
An exit strategy ensures that your business can continue when situations beyond your control cause your absence from your business, like health problems, internal and external conflict, or when the business needs to be sold quickly due to changes in the market or economy.
It provides detailed steps that will guide stakeholders to ensure that business activities are not adversely affected.
Whether by selling it to other interested parties or simply transferring it to new management as specified in the exit plan.
4. Maximize Returns on Investment
An exit strategy ensures that you maximize the gains from the business when you retire or sell it.
By planning your exit early, you become more conscious of business decisions that would help you increase the value of your business, form strategic relationships with investors, position your business to take advantage of potential opportunities in little time.
All these would ensure that the eventual buyer pays an amount that reflects the true worth of the business.
An exit strategy also demonstrates to investors that you have a clear path to the future for the business.
When investors give you money, they want to see how that money (as loan or equity investment) they want to see how that money will be used today to generate returns.
An exit strategy provides this for them, hence making it more likely that you would get the investment or loan when you ask for it.
Many business owners want to believe that they can control how they exit their business and that there is still time to plan for a future for their business.
Only smart entrepreneurs know that the only way they can exit their business on their terms and profitably is when they plan for it.
What is stopping you from creating an exit plan for your small business?
If you need help planning an exit or growing your small business to reach your next milestone, the SME Coach is your best option.
The SME Coach helps small business owners by providing practical strategies, access to the right tools, and a network that would guide your small business to success.