Why it is important to have a business exit strategy

Why it is important to have a business exit strategy

It may seem rather strange talking about an exit strategy when initially setting up a business. Surely all of the focus should be on setting up the business, creating strong foundations and building for the future? The fact is that an exit strategy is as important as a start-up strategy because at the end of the day, if you don’t know where you are going, how will you know when you get there?

Short, medium and long-term strategies

It would be foolish to suggest that your focus should be wholly on a long-term exit strategy because if this was the case you might not even have a business to sell in the future. When setting up a business, or acquiring an existing one, you should have an array of short, medium and long-term goals. There is no point in setting goals which could be months or years away, take small steps, set up small goals so that you feel a sense of achievement when you hit them. Very quickly your targets will become tougher, your focus more steel minded and it will become a very useful habit to have, hitting targets.

Building momentum

The more targets you hit the more momentum this builds behind your business and the stronger you feel. It would be foolish to suggest that the road to success will not be without its sharp turns and bumps but even momentum can help you beat your challenges. So, set out a number of short-term goals, set out a number of medium-term goals which will lead to one long-term goal, an exit route.

This is why as your business grows you need to bring in people you trust, people with experience and those you can work with. It is impossible to micromanage the everyday operations of your business while setting short, medium and long-term goals. The world of business is littered with those who had good ideas, started very strongly but refused to delegate even run-of-the-mill actions to other people.

It is also worth remembering, if you have a long-term exit strategy, perhaps a trade sale or a handover to family members, if you “are” the business then the change when you finally leave will be monumental. We are not suggesting that by the time you exit the business you will have a “hands off” approach but as you near the exit door so more and more of the day-to-day operations should be carried out by your employees. This leaves a potential owner to concentrate on short, medium and long-term goals for themselves, in the knowledge that the day-to-day operations are in good hands.

Adapt to the changing times

As the duration between starting up a business and exiting can take in many years if not decades, there will be periods where you need to adapt to changing times. The Internet is a prime example of a monumental change in the business world which many companies were slow to adapt to and some simply failed. The “blue-chip list” of UK corporate entities has been slashed over the years with companies failing to embrace change left high and dry.

One problem was that many of these large corporations believed their customers would show more loyalty to their business rather than scouring the Internet to find the cheapest price. Companies such as Marks & Spencer very quickly found out that the Internet was the way forward, people were not shopping on the high street as much as they used to and the pressure on prices was only achievable because of online cost savings. While Marks & Spencer will live to fight another day there is no doubt that the company is not quite what used to be, it does not have the same presence and this is simply because of the slow uptake in going online.

If you put yourself in the shoes of somebody that wants to take over your business, they want an operation which is already ecommerce friendly that does not require significant investment to “bring it up to date”. They may believe a fresh set of eyes, younger management and investment in specific areas of the business will take it to the next level, but there must be a basis for a good business before anybody would even consider purchasing your company.

Don’t be greedy

There are very few times when the value of a specific asset in our head is replicated in the marketplace. There may be occasions where a number of bidders step forward to push the price above and beyond the “fair value” but these situations are few and far between. In the past we have seen business owners looking to exit only to become greedy and believe that their value is more accurate than what the market is telling them. There are many different factors to take into consideration including:

• Competition
• Future investment required
• Barriers to entry
• Demand for the type of business in question

We are not suggesting that a business owner, who was perhaps spent decades building up their company, simply bails out at the first opportunity but there does need to be some variance on their target price.


When starting a business you need to have short-term goals, medium term aspirations and long-term targets. All of these three elements are vital in keeping momentum and interest going for what could be decades in business. Short-term goals ensure the feelgood factor and create momentum, medium term aspirations allow the owner to see where the business is going and a long-term exit strategy denotes what might be the end of the journey. The fact is that when you start out on your business journey how can you ever know you have “got there” if you don’t know where you are going.

In the vast majority of long-term businesses there will be significant changes along the journey. The online market has decimated the high street and brought small operators into direct competition with previously dominant players. Brexit will bring about a change in trading relations between the UK and Europe and potentially open up an array of new avenues. At the end of the day, any business is only worth what somebody is willing to pay for it which is why very often the theoretical value in a founder’s mind can vary significantly from the “market” price.



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