Thanks for the question.

My single greatest “regret” is that I did not know when I first started in business. the importance of having an exit strategy. And I believe that the majority of people that start a business make the same mistake.

I say this because while it is great to have a business that is profitable, the fact is that it takes a huge amount of time, effort, dedication and sacrifice to establish and develop that business … and if you are not building a saleable asset, then much of that time and effort is wasted.

The price you can pay for not having a clear exit strategy, is where the business makes a profit and the owner wants to minimize their tax exposure each year. This is legally possible by re-investing profits back into the business BUT it does not necessarily mean you are building the tangible value of the business.

I made this mistake in my first business and reinvested thousands and thousands into stock, better leased vehicles, equipment etc., only to discover several years later, that by “accounting standards” there was little “good will” value in the business once I was gone. As a result when I was forced to move several years later, and could not find a buyer … so much of that reinvestment would have been better off being reinvested in something else where the tangible asset value increased and was not dependent on a suitable buyer … e.g. property.

Too many people that start business think that running your own business is the “be all and end all”. But that is a complete fallacy. If you do not build a business that is structured correctly - and that will have serious prospective buyers, the amount of work you put in, will often not be rewarded. Remember, most private businesses are often only valued at 3 times the nett profit created. So you can find yourself in the position of having reinvested your profits into the business, but the “good will value” is decreased when the owner wants to sell, and few if any buyers. And the few buyers that are potentially interested, will not have any interest in paying anything more than a minimum price … often because they want to ‘invest not operate’ … and when you are gone, who is going to run the company?

The appropriate exit strategy will help you plan where you hope to go, and help show you how to get there.

This should be taught in business school, but even those that study for an MBA seldom understand this critical reality.