The Power of Early Exit Planning for Entrepreneurs

A successful entrepreneur’s greatest responsibility is to prepare their business (and themselves) as early and intentionally as possible for The Dream Exit? they’ve earned and deserve.

This is true even if they’re not ready to sell or think they never will.

An entrepreneur’s dream exit results when two objectives are met. First, the entrepreneur’s business sells for its maximum value. Second, the entrepreneur’s continued meaning and purpose is maximized in their post-exit life.

Surprisingly, many entrepreneurs neglect this crucial aspect of business planning. They launch their ventures with a vision, a plan, and a drive to succeed, but often overlook the importance of maximizing their business's potential and value over time. This oversight can be costly.

An exit strategy isn't merely a plan for selling your business, it's a strategic playbook that guides an entrepreneur's planning and decisions from the outset. Operating with this principle in mind significantly enhances your business's worth. It also makes you a better entrepreneur.

When you run your business as if it's always for sale, you commit and become intentional about doing the right things, the right way, all the time. You adopt a 'buyers’ lens’ that keeps you looking at and valuing your business the way a potential buyer would.

This intentional exit strategy planning changes the game by:

1. Providing Clarity and Direction: It aligns operational and personal decisions with long-term goals, influencing your business model, target market, and growth strategy.
2. Increasing the Value of the Business: It encourages a focus on building sustainable systems, diversifying the client base, and strengthening the brand -- all attractive to potential buyers or successors.
3. Leveling the Playing Field: Buyers are experienced and often expect to have an advantage. Effective exit planning levels the playing field and shifts this advantage to you, which is where it should be.

Over my career, I’ve purchased 23 companies from entrepreneurs. Not one had done any kind of exit planning or had an exit strategy as far as I could tell. The first serious thought that any of them had about exiting came after me or my partner first asked them if they would be interested in selling. I’m sure they dreamed about it – all entrepreneurs do - but they never explored that ‘dream’ with any serious planning effort.

And you can guess what happened. In every case, we had the opportunity to define what their dream exit looked like through our ‘buyers’ lens’ instead of theirs. We had the advantage and we used it to make our dream purchase, not their dream exit, come true.

Ironically, even with the benefit of these experiences in my back pocket, I left $4M on the table of my first exit because my ego told me I knew what I was doing. My ego lied. It was the buyer who knew better. Lesson learned.

They say that you get what you deserve in life, but when it comes maximizing the value of your business and the value of your life’s work it’s simply not true. You only get what you deserve when you plan to get what you deserve.

You should start your dream exit journey today. It only requires courage and a few simple, actionable steps:

1. Develop an Exit-Ready Mindset Today: Embrace the concept of exit planning as a tool for continuous improvement and value creation.
2. Design Your Business to Operate Optimally Without You: Build a competent team and systems that ensure business continuity and increase its value.
3. Commit to Being the Best Exit-Ready Entrepreneur Possible: Make exit readiness a priority and a consistent part of your business strategy.
4. Accept that Being Exit-Ready is Your Most Important Responsibility: Recognize the impact of early, intentional, and consistent exit planning on your business's value.
5. Get Help: Find an expert now who knows the ropes and can help start getting you exit-ready today with your thinking and your business.

If these steps resonate with you, congratulations! Your journey is underway. You're already experiencing the transformative power of an exit planning strategy on you and your business. Remember, The Dream Exit? isn't just about the destination; it's about the journey of continuous growth and value creation.

Bio – Mike Malatesta is The Dream Exit? Expert, host of the How’d it Happen podcast, and author of “Owner Shift: How Getting Selfish Got Me Unstuck.” Email [email protected].

[This article first appeared in the 09.11.2023 issue of the BizTimes.]