If you’re like most entrepreneurs, your business is your life. Your blood, sweat and toil have turned it into your baby, and all you want is to see it do well. But this, as you know, can be a tremendous challenge, especially if you own a digital business and are operating in the roller coaster world of the Internet.
There are loads of different ways to overcome this and to build a sustainable, profitable and functional business even in the most uncertain of industries. Designing an exit strategy is one of these ways, but it is something very few small business owners have thought about. In fact, a report from BMO wealth management indicates that 65 percent of small business owners do not have a plan in place for when they decide to sell their business (BMO: October 2016 Report).
This is troubling for two reasons:
This indicates business owners are not paying enough attention to their retirement plans.
It shows how many business owners are missing out on an effective tool for helping them build a better and more successful business right now.
A Business worth Buying Is a Business worth Owning
The reason an exit strategy can be so helpful in building your digital business is simple: if you set up your business to be attractive to investors, it’s a sign you are currently doing things well and that you can expect more future success.
At this moment, some small business owners may be saying “But I don’t want to sell my business!” Perhaps you have plans in place to turn it over to a partner or relative, or perhaps you just don’t want to think about the prospect of turning over your baby to someone else.
But that’s really not the point. It’s more about the mindset. Designing an exit strategy and taking the necessary steps to implement it gives you tangible goals to work towards to help make your business better. And, while some of you may think you have it all worked out, unexpected things can happen. It’s better to have a plan in place and not need to use it than to not have one and be wishing you did.
Setting Yourself up for Long-term Growth
One of the main reasons having an exit strategy can help you build your digital business is that it sets you up for the future. This is particularly relevant for those with digital businesses. Things can be volatile, and if you are not always thinking at least several steps ahead, you could find yourself struggling to catch up after it’s too late.
Branding is a great example of something that you could be doing that would help your business both right now and in the future. Investors, and perhaps more importantly, customers, like well-known brands. Dedicating time and resources to a detailed branding campaign will help boost sales while also opening up doors for sustained growth moving forward.
Minimal Risk
Another thing that investors will look for when you try to sell your business is risk. They want to see what risk exists and how you have planned to try and mitigate it. No one wants to spend hundreds of thousands or more on a shaky business that “might” be successful in the future. And you don’t want to be running that type of business, either.
By approaching your business strategy now as if you were getting ready to sell the company, you will put risk mitigation at the forefront of what you do. It will also help you make better decisions. If you are thinking of expanding into a new market or product line, ask yourself, “if I were looking to buy this company, would I feel comfortable seeing this level of risk?”
Of course, you have to be willing to take chances, but doing so with the mindset of building and implementing an exit strategy will help you do so in a way that makes sense and that will contribute to the overall health of your business.
Smooth and Efficient Operation
The word “owner” conjures up the idea of “most important.” Well, this isn’t exactly true. While your vision, dedication and investment may be at the core of the business, if it is set up so that it can’t run without you, there’s a problem.
Businesses, like any other organization, are living organisms. They have a variety of different parts that do different tasks, but they all complement each other in a way that ensures survival. You don’t want to set up your business so that the removal of one part completely destroys it. Investors would not like to see this, and you, as the owner, will be healthier and saner if it were the case. Imagine, you might actually be able to take a vacation!
So using an exit strategy as a way to build your business gets you thinking about how your business runs. Where could it be more efficient? More independent? Smoother? You’re likely thinking about this stuff at least a little bit, but doing so to plan an exit strategy will help you hone in on areas that need to be improved, bringing about the change more quickly and making drastic improvements on your business.
A Built-in Retirement Plan
One final thing to mention is planning for retirement. Small business owners are known for not saving enough for retirement (Brooks: USA Today), often because they employ the “the business is my retirement” logic. Either they plan to turn it over to a friend or relative in exchange for future wealth, or there is a plan to sell it.
Well, if the plan is to sell it, implementing a strategy now that would help to increase the value of the business would help to expand this expected income when retirement time does come. Focusing on this instead of taking from the business to save will help you free up some resources for expanding the businesses now, and it will also help set you up for a safer and more secure future.
So even if the very idea of selling your business sounds like blasphemy, running your business as if you might some day is most certainly not. It gets you thinking about your business in a new way so that you can run it differently and bring it to new heights.
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Jock is the founder of Digital Exits, an online brokerage service. He has been featured in Forbes and contributed to numerous websites and podcasts. He specialises in appraising and buying/selling online businesses and working with fellow entrepreneurs.
