Why an Exit Strategy?
In the now classic book, The E Myth, by Michael Gerber, he recommends that business owners move away from seeing their business as something they work in, and see it as something they work on. Instead of selling products or services, he counsels them to see the business itself as the product they are creating, and to get it to the point where it could be sold. This causes the owner to truly build a business, rather than just creating a job for himself.
Imagining that you are going to franchise your business accomplishes two goals – you gain a future-oriented vision, and you adopt an outside perspective.
When you make a clear vision of your future business, you no longer only see the day-to-day operations as your only goal, but you also focus on the long-term smooth functioning of your business. You envision where you want your business to be, and you put structures and systems in place to support that future entity, even if you don’t quite need them now.
Secondly, you see your business from an outside point of view. In your mind you prepare to sell the entire business itself, not just the products or services that the business sells. Imagining the business as operating without you someday, you work to get it more and more to the point where it can operate without you already.
And what if something were to happen to you while the business still needs you? Could your partner keep it up? Could your family run the business? What resources would they need to be able to keep the business together and carry on your legacy? This is where insurance can help prepare your exit strategy for your business.
In the case of a partnership, a buy-sell agreement should be drafted, laying out the terms of what would happen in the case of one partner retiring, walking away, becoming disabled, or dying. Life insurance policies provide the funding so that in the worst case scenarios the surviving partner can buy out the estate of a deceased or disabled partner. In the case where the business depends upon a very important employee, key-man insurance will provide a payout if that key employee passes, so that the business can continue to function smoothly.
In any case, to build a business you are proud to put your name on and leave behind takes vision and planning. Then you will be putting in place the structures – including insurance – to take you from where you are to where you want to be.