In the second year of the Civil War, Union troops were destined to learn a tragic and valuable lesson about the lack of a well thought out exit strategy from battle. It was December of 1862 and Federal troops had taken up positions in the town of Fredericksburg, Virginia—determined to cross the Rappahannock River and attack Confederate troops on their way to the Rebel capital of Richmond.
In preparing for the Battle of Fredericksburg, they badly underestimated just how dug in and fortified the Confederate positions were. As company after company crossed the river in boats in preparation for the upcoming fight, many of the officers and men in the Federal camp were amazed that there seemed to be little or no resistance to their initial advance.
Then, a lowly Private in one of the boats made an educated guess, which foretold of the impending disaster by stating, “They want to get us in good and close. Getting out won’t be so smart and easy.”
Over the next two days, Federal troops were soundly defeated, with over 17,000 killed, wounded or missing. And much of the slaughter could be traced back to their lack of a cohesive exit strategy.
The same holds true today when it comes to the consideration of business ownership. While it has been stated previously in this blog series many times before, the single-most important consideration is choosing the right type of business. If done properly, this will determine your roadmap to success. However, equally important should be your long-term plan for strategizing an exit or transition once the business objectives have been fulfilled to your own personal satisfaction.
Dr. Stephen R. Covey, author of the immensely popular best-seller, “The Seven Habits of Highly Effective People” echoes the value of exit strategies by outlining his views in Habit No. 2: Begin With the End in Mind. This important concept holds that you, as the prospective business owner, must be able to envision the proposed destination of your plan, start to finish—and remain proactive enough to see it through to the finish line. Covey clearly states that the easiest way to accomplish this method of thinking is to write out your Personal Mission Statement. And that includes covering all of your bases from the inception of your plan all the way through to a carefully crafted exit strategy.
What you need to know is that having a well-thought out exit plan is going to shape how you will both build up and run your business. Keep in mind that when you begin the effort to author your all too important business plan, an exit strategy should receive a Roman Numeral of its own. Americans are living longer and healthier lives. And your business should have just as healthy a life, as well. Below are the three main options for a well-crafted exit strategy of your business:
Selling Your Business
This is a very attractive option because it raises the specter of “cashing out” once the business has built up valuable equity of its own. If you begin a business with the outlook of one day selling it for a profit, deciding and knowing when to pull the trigger will be a concern. However, if your exit strategy calls for a set amount of time to elapse prior to the sale — say five or ten years — stick to your plan and prepare to reap the benefits of your hard work.
Running Past Retirement
The United States has an official retirement age, but these days it is becoming an oft-ignored date. As previously stated, people are living longer and healthier lives and often times obtain much enjoyment from running a successful business into their golden years. Perhaps then, you intend to stay on and direct efforts while considering family members as natural successors. Inheritance in this case can mean a well-developed business in addition to other financial holdings. And there’s nothing wrong with keeping things in the family, provided that the initial business plan and direction are continually in line with the original details.
Taking a Step Back
Another popular exit strategy—especially in the franchise world—is having the ability to step back and allow another individual to lead your business efforts. Ownership is retained and, in effect, you have the option to bring in a qualified candidate in order to “Manage the Manager.” If the right match can be found, whom you will entrust to run the day-to-day dealings of your business, you will have increased leisure time while your equity continues to grow at the pace you are directing. This tactical method is also referred to as the “Semi-Absentee Model” in the franchise world.
Hopefully you now have a clearer understanding of just how important an exit strategy can be in relation to your overall business plan. Make it a vital part of your strategy from the outset and you’ll be in position to benefit from the equity you will have built up over the life cycle of your business or franchise.
Do you feel that you’re ready to get started? If this article has inspired you to craft an initial business plan with a well-thought out exit strategy, perhaps it’s time to talk with a qualified and experienced franchise consultant. As it turns out, FranNet is just the place! As a franchise consultant company with a great track record of assisting individuals on their path to business ownership, make arrangements to speak with one of our representatives today.