Residential Real EstateExit Strategies: What"s Yours?
Back when I started my business, (and I was one of the few who thought of it as a business within a business, working for a real estate broker) my business plan was loose and by the seat of my pants. Now there are profound changes in the industry that forced me to work this strategy into the plan. So what happened?
It was a major surgery that made me stop to think. So, I began my research. Before the Internet, that meant asking, interviewing and making mistakes. Luckily, I was given more time by the fates to get my act together. Then, an agent in my office was dramatically physically damaged by a motorcycle accident, one in which her boyfriend was killed. She cannot speak, and it will be years of physical therapy before she can be functional. If.
She leaves her business. Really leaves her business. There is no plan, and her business has no value now.
Values change during the years, but what do we have of value?We have Intellectual Property, which is now considered an "asset", equipment we never had before, software, expertise and teams. In the beginning, any individual agent"s business was little more than the sum of the agent"s collective vision and specific talents. Should they leave, not much else of value remained.
Over the years, however, there are clients who have come to depend on its services, and there is a revenue stream -- tangible stuff that makes it easier for an investor or buyer to put a price tag on it. Knowing your business" price tag becomes essential, if its full value is to be realized.
Exit strategies as a goal
I began to consider the exit strategy question as an opportunity to educate myself about what was truly needed. I began to see my exit strategy less as a termination and more as a logical part of the goals I had set for both my business and myself. While I may, at some point in career, sell, exit, merge, etc. I will be more prepared. An exit strategy can -- and must -- change, as the business and its goals change.
Working in entrepreneurial nirvana with no consideration of its end or change will short you in the end. The reality is that unless you define that end or change, your business may change in a way that wasn"t in your plan.
Educate yourself through listening, reading, and interacting to know what others strive for, both in like-minded and not so like-minded businesses.
So what is a good exit strategy?
An exit strategy is an accountable record of your business woven into your business plan. It is three to five years of tracking of your client base, the sales via buyers and sellers, your costs involved in creating that client base and therefore your income. It is essentially a track record that enables a potential buyer to duplicate just what you"ve done to generate your income.
It"s an important issue because it establishes the value of your business. Since a buyer will want to look at a three to five year trackable record of amounts of clients, amounts of marketing, advertising, follow-up costs, etc. it took to achieve the annual income, the time to start is when you"ve created a business plan.
Here are the 10 most important things you need to consider about exit strategies:
Decide where you want to be in 5 years, 10 years, 20 years.
Make sure your employees know your goals or growth and change.
Stay flexible, and have a backup plan because business, life and goals change.
Update your business plan, and make sure it includes an exit strategy.
Keep your financials current, and have them audited yearly. It adds to their value.
Put together a team of experts, including a CPA, an attorney and a financial advisor or other expert for valuing your business and intellectual property.
Run the company every day as if it were going to be sold.
A mistake is thinking that it will be easier getting out than it was getting in.
Prepare a "selling your company" file and checklist for monthly/annual reviews to keep on track to meet your goals.
Attempting to sell your business on short notice means that you are not in control of the sale.
Do what"s right for you
Write your exit strategy down. Have a road map with a start and a finish. Know how to answer the "What is your exit strategy?" question, but also know that you"re really answering the "What are your vision and goal?" question. And realize that, through identifying your exit strategy, you have a chance to preserve and control your own entrepreneurial nirvana.