What’s an Exit Strategy and why you need to have one in place

Exit Strategy is one of the most important element of your preliminary business plans (even though you wish that the need of executing these plans will not arise anytime soon). Exit Strategy (also known as an Exit Plan) is the line of action that you may choose in case the going gets too tough to continue. In simple words, it’s the easiest way out of a ruinous situation while incurring the least possible loss. You’ve got to have an exit strategy as a backup plan right from the start instead of waiting for some unfortunate situation to surface, since in most cases the upheaval will be too sudden to tackle on the spot.

Even if there’s no catastrophic situation, you can possibly have other reasons for disengaging from the business that you’ve started (when wrapping off everything is not an option). These reasons can be, you looking to go for another more lucrative venture, or you may be thinking of giving up work for some time, you may also need an exit strategy when planning to sell a running business and sellers are interested in knowing if there’s any exit strategy in place, in case the profits start to go down, putting up an exit strategy will cast positive impression on prospective buyers or investors.

People often make this mistake of ignoring the exit strategy and starting without having any backup plans. Some entrepreneurs are too optimistic to think that anything can go wrong with their business; others are confident that they’ll handle the situation, then and there. Nothing’s wrong with the optimism or confidence but it’s always harder to evaluate and tackle the situation once you are “in” it, the haste or pressure situation can get on your mind, resulting in an erroneous decision. Besides, having an exit strategy will only boost your confidence.

Put these two kinds of entrepreneurs side by side, one starts off without an exit strategy while the other one is having a solid exit plan. Who do you think will crumble more easily and more quickly as soon as the proceeding goes wrong? Quite obviously, the one who’s having an exit plan will immediately get to the task, while the other one will have to do the thinking from the scratch. More often than not, this thinking will eat into the grace period and result in a much bigger loss as compared to the loss incurred by the other fellow.

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