After getting laid off at the worst possible time in my life – when my wife was pregnant with our first child and wasn’t working, and with no other source of income in our lives – I had a decision to make. Do I return to the comfort of a steady paycheck, or do I fulfill my lifelong dream of entrepreneurship? On October 1, 1996, I decided to go all-in for the more challenging yet rewarding path of entrepreneurship.

To take charge of my destiny, just four years into my new venture, I decided to lay the path to my family’s and my “dreamland” by writing my plan to exit. In 2000, when the company was barely profitable, the plan called for my family and I to reach financial independence when I was between 50 and 55. That meant I had 18 to 23 years to bring this plan to fruition. Extremely aggressive, to say the least.

How in the world could I make this happen? As I described in my last series of columns, Your Path to Increased Profit, I needed to have a laser-sharp focus, incessant fire and unwavering commitment to achieving my goals, regardless of how impossible they might seem.

It required major changes. For example, when our second child was born in 1999, I requested my wife to quit her full-time job as an accountant and join me in the business. Her working from home and being there for the children freed me to be able to dedicate additional time to business.

Additionally, as a team, we wrote up a plan with the steps we needed to take throughout the business cycles to consistently increase the value of our business to a prospective buyer. I took steps throughout the life of the business to maximize profitability and make my business stand out, such as hiring full-time graphic designers, overdelivering with every customer touchpoint and streamlining the operations to be the best in all phases of the business.

Because of that hard work and dedication, I’m proud to say that at age 49 I was able to reach financial independence – a year earlier than my plan called for. Four years later, I was able to exit my business after selling to another company in the promotional product space.

To my entrepreneurial friends out there, understand that besides death and taxes, there’s this inescapable truth: as the business owner, you will one day have to exit your business. Will it be planned? Or will it sneak up on you – perhaps even forced due to unforeseen or unfortunate circumstances, such as family situations (divorce, death, disagreements), health reasons (serious illness, disability), business (losing a significant client, business downturn, partnership issues, lawsuits) or a health crisis like COVID. Doesn’t it make sense for you to have an exit strategy in place regardless of the number of years you have been in business?

Where To Begin With Your Exit Strategy

An exit strategy is a comprehensive plan that allows business owners to exit the business on their terms at a substantial profit when it’s on an upward momentum or, in certain situations, becomes no longer profitable. Your business is your asset, probably your most significant financial asset. You’ve worked very hard to grow it with long hours, blood and sweat. It should steadily increase in value so you can harvest additional wealth when it comes.

I hope you see the wisdom in having an exit strategy. But you may not know where to begin. Here’s a broad look at the steps needed to plan an exit strategy (I will go into greater detail in subsequent columns):

First and foremost, you must have a written plan. It must align with your personal, business, financial, family and legacy goals. Unless you know your destination, you can’t reach it, right?

Second, you must understand the characteristics that affect the value of your business and continue making adjustments accordingly. Is the business dependent on the owner? Do you have a manual of written systems and processes that can be followed, duplicated and scaled? What’s your staff and intellectual capital: employment longevity/experience, business certifications, registered patents, proprietary software or systems, etc.? Can you provide financial reports audited by a CPA? Is your product and market trending upward? (Smart sellers often have a one- to three-year business plan ready to show to buyers.)

Third, consider the right exit strategy for you. Will you merge with another company? Find a private equity buyer? Perhaps you’ll sell to the company’s management or transition ownership to a child or family member.

Fourth, as time comes closer, you’ll need to assemble a team of professionals: a CPA, attorney, M&A broker and financial advisor.

Last, you must write down reasons for exiting. Before the sale as you’re making your plans, you might be extremely excited about all the traveling, golfing, family time and other fun activities you want to pursue. But during and after the sale, you’ll go through a roller coaster of emotion when you realize you’re no longer in control of your “baby” – your business that you gave birth to. When you have that empty feeling in your gut and your emotions get the best of you, that list of reasons will come to your rescue.