When Should a Start-up Start Thinking about an Exit Strategy?

It can be difficult to think about an exit plan when you just started a business that you have been thinking of. It feels out of place when you have an exit plan when you just barely have funds, or perhaps a team, and you are trying to make the venture work. It feels a bit negative to start thinking of an exit. However, a professional exit plan is vital to help you shape business decisions and it is a major factor of your business plan.

What is an Exit Strategy?

It really has no universal definition, but it is basically when you decide not to continue with the business you started. You will also have to produce a return on the money your investor gets from putting money in your business.

Why get an exit strategy at all?

The reasons an exit happens could be because of the failure of the business, more money is needed to be invested, the investors have new demands, the owner has met retirement or market conditions have changed.

You may also want to exit because a new idea has caught your heart and perhaps, you realise that you can’t take the job further or you want to get back the initial capital you injected into the business. The last position you want to be in is working on an idea that you’re no longer committed to and wishing that you could dedicate your time to another project.

Exits happen because life happens

If you have or plan on getting investors, they would want to know how you plan to groom your business, and they would want you to be explicit about your goals, the time frame of your business and your estimated ROI forecast. Further, they would want to know how much value your business would have with accurate data to back up your projections and most importantly, your exit plan. You might have gotten into business initially because you identified that you have an entrepreneurial spirt, but circumstances change.

When to plan the exit

It is never too early to put your exit strategy in place. A report says that 90% of private businesses don’t have exit strategies- leaving them to be pulled out on conditions they are not comfortable with or leaving them to die on their desks.

You should keep the heart of your business going. Grow your customer base and don’t wait until you get a hint of trouble to get under undue pressure. Exit strategies help you to decide on who you should get in your team, how to run your company, how to build up your financial report and taxes, agreements, copyrights and trademarks.

Having an exit strategy helps you to see things that could go wrong before they actually do and helps you to plan ahead to mitigate them. Think of it as a necessary thing to have in place to keep your life in order, should your business idea not go to plan. Exit strategies should be considered as early as you have a business plan in place.