If you’re launching a product business, the last thing you want to think about is what happens if you fail. But part of starting a business is planning ahead for all contingencies—including exiting your business.
Somewhere down the line, you might come to the point where your business is no longer growing or bringing in revenue and you don’t want to sink in any more resources. The last thing that you want to do is scramble to put together a last-minute plan to end your business.
That’s why it’s important to have an exit strategy in place before you start your business. With the right planning, you could end up saving time and money and making a stressful situation go much more smoothly.
Read on to find out what you need to ask yourself so that you can get clear on your exit plan before you start your product business.
When Will it Be Time to Exit?
Before you start your business, you need to be honest with yourself about how long you are willing to put resources into your business, and how much time and money you are willing to invest.
Think about your financial projections and your goals for your business. Give yourself a realistic timeline to make those goals a reality. Then decide on the numbers that would indicate it’s time to start planning your exit.
Businesses take time to grow, and you want to give your company a chance to flourish. At the same time, you need to understand the metrics that would tell you it’s time to shut down.
Pinpointing the numbers and the timeline will prevent you from going into greater debt and expending resources on a business that is no longer viable.
How Will I Handle Business Debt?
When you decide to exit your business, you might have business debt. Keep that in mind when deciding how to fund your business.
If you end up with business debt, you’ll have to either settle your debt or declare bankruptcy. But only some types of loans allow you to declare bankruptcy, which will only affect your business’s credit—not your personal credit.
If you end up going the debt settlement route and you’ve used credit cards to finance your business, you might be able to get your credit reduced by 50%.
Make sure that you understand the types of loans you get and the long-reaching implications if you end up shutting down. Thinking about this now will help you choose a funding option for your business that will allow you to minimize damage to your credit and bank account.
What Will My Exit Strategy Be?
There are many options for how to exit your business. Your primary choices are to sell the business, liquidate it, or pivot.
Even if your business isn’t as successful as you would like it to be, you might be able to sell it. A larger company might see the potential in your business, or someone who is interested in launching a beauty brand might like the idea of starting out with all of your assets (including your branding, packaging, and existing relationships).
If you decide that your business is no longer viable, but you think that you could use your brand assets in a new way, you can choose to pivot and take your business in a new direction.
Your third option is to liquidate your business, selling off your remaining inventory, and closing down your website and digital presence.
What if I Have a Business Partner?
If you have one or more business partners, you need to do a little bit of extra exit-strategy planning before you launch. Make sure that you decide what to do if one of you wants out of the business.
Will that person have to buy out the other partner or partners? How will the remaining assets, like your branding and packaging, be distributed if you need to close the business down.
You also need to get clear on how you would handle different possible financial scenarios you might find yourself in.
What will you do if someone wants to buy your company? How will you evaluate potential buyers? On the other hand, What will you do if you decide to close the business and you have debt?
Discuss these decisions in advance so you know that you are all on the same page and you have guidelines to rely upon later on.
Plan Now, Adjust Later
Planning and preparing are crucial to every aspect of business, including exiting. But realistically, it’s very difficult to know what will make sense a few years down the road.
You can always change your plan as your business shifts. However, it’s good to have an idea of what you will do if you decide to close down your company.
An exit strategy will guide your actions and help protect you from wasting resources on a business that you no longer want to sustain.
Launching your product business and need more insider tips? Check out our post, Choosing a Distribution Channel for Your Product, for more guidance on making decisions when you’re starting out!