Creating a business can be one of the most rewarding and challenging endeavors for business founders. Founders are people who play a main role in creating and establishing a new company, taking the initial risks and responsibilities of turning a vision into a functioning business. They are the driving force in a company’s early stages, overall culture, and ultimately, its fate.
At the start of a new endeavor such as a new business or brand, founders do it all. From operations, to finances, delegating tasks, managing a storefront, even janitorial services. This is the dedication needed to get a company to grow to the next level where a founder can step away from daily operations and plan for an ultimate strategy: the exit.
Continue reading, and you’ll learn about what can happen over a five-year exit plan that can provide structure, well thought out planning, and an objective outlook to prepare for this type of business deal.
Year One: It’s Time to Take a Step Back
The first year can be the hardest to get to sometimes. Depending on your current role in the company, taking a step back means that all your bases are covered. You need clarity and a strong foundation of the business. You need a plan.
Year one is all about finding transparency and grounding. Selling your business requires you to have a strong grasp of understanding when it comes to financials, operations, and future goals. Stay honest with yourself and your team and the areas of improvement to work on will be revealed.
During the first year, it’s important to know what you want. Do you plan to sell the entire company or stay involved? How involved do you want to be, if at all? What does the business deal look like to you? Answering these questions will help to execute the following years ahead for a successful exit. This stage will define everything. By the end of year one, you want to be fully out of daily operations and know your end goal.
Year Two: Choose Your Team
Spending the first year gaining clarity and setting goals will have you off to the races. Next, it’s time to choose your team. Who do you want as core contributors to this effort of a business exit? Find your people. You want leadership roles for full operations, sales and marketing, and a financial chief so the founder is completely removed from these departments.
Year two is about stability and becoming a predictable company. Learn your stats, know your metrics and tendencies throughout each quarter. When is your high and low season? You want to be a company that is consistent in trends, to make the business a low-risk investment to others. Knowing your company at this depth is key.
Year Three: Know Your Worth
Once you get to year three, the business should be running on auto-pilot. You have your team, and trends are consistent and stable. Now, it’s time to know your worth. What is the value of your business? Understanding your business’ position in the market and your industry is important so you know what buyers are looking for, and where you can improve to become more valuable.
Getting a valuation is a great next step to handle in year three. This is the next step for your growth and development. Having a strong company that is scalable makes a safe investment for a buyer. Having a stable foundation can signal that a company is ready for growth.
Year Four: Step Into the Market
By year four, a business is stable, scalable, and has a focused, strong team. It’s time to step into the market. This can be a great opportunity to meet with private investors, equity firms, competitors, or business colleagues and internal employees that may be interested in buying your business. Start here first, then expand from outward.
This year can also be spent making sure your brand awareness is strong, and that you have excellent customer experience journeys, and a good reputation. These factors go a long way in the market, and are essential for any investor. Make sure you’re looking good from all angles. Review your digital presence, use social media to keep your image and mission clear, and stay steady with your presence in your industry, all while becoming known as available for purchase.
Year Five: It’s Time to Exit
Year five, the final year. This is the year of transition. You’ve found your buyer, and ready to spend this year making a smooth transfer. Once you have a deal, make sure everything is handled properly with legal and financial advisors so your records are in good standing. Be sure your taxes are accurate, any financial records are confirmed, and negotiations have all been handled.
During this year, it’s important that the founder stays involved in the exit so everything is handled accurately and completely. When all is said and done, the founder will be on their way to embarking on a new endeavor after selling the business, or perhaps taking a vacation first and enjoying the experience that was turned into a success.
It’s Just the Beginning
For many founders, an exit strategy is an ultimate goal for a business. From building something that was once a thought into a successful company to be sold is an amazing accomplishment and one to be celebrated. Founders can be motivated from reaching such a goal, that they keep going on to the next idea, as if it’s just the beginning.