Quick Insight
Plan your exit strategy before you start a company or implement a major strategy. The results of any strategy are uncertain. Planning at the start can help minimize exit costs. Planning also helps you position yourself to capture opportunities.
When I was in college, there was a church near the college that had a very simple sanctuary made of cinderblock walls. When the church was built, they were hopeful for the success of the church, but they were uncertain and cautious. They built the church building so it could be sold as warehouse space if they couldn’t continue to afford it. That’s starting with an exit strategy!
I teach the Entrepreneurial Finance class to MBA students at a local university. In that class, I tell them to plan their exit strategy whenever they start a company or implement a major strategy. The results of any strategy are uncertain. Strategies are a series of experiments with three outcomes:
- The experiment is a success. Continue doing the same until it doesn’t work or you have a better idea.
- We learn something in the experiment, and we decide to make changes to our strategy.
- The experiment results are not what we want, so we discontinue this experiment and try something else.
You need an exit strategy because sometimes the costs to exit (i.e., to discontinue your strategy experiment) are high. Planning at the start can help minimize these costs. Planning also helps you position yourself to capture opportunities.
By the way, the church used the building for decades until 2021. They then sold it to a nonprofit organization.
I wish you successful experiments and a clean exit from those that don't work. I wish you well.
- Rob Stephens
Founder of CFO Perspective and the Finance and Strategy Toolkit (FAST)
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