Listen to the UpgradeU Podcast | Ep. 1 Start > Scared for details on the mindset for building an exit strategy. Click here to listen
Once you’re ready to start something new for your business, your list of “what ifs” starts to grow exponentially. Suddenly you find yourself lying awake at night with anxiety around the next steps for your business. Every girl boss can completely relate. An effective exit strategy is the key to shift those fears into fuel for a successful upgrade to your business.
It’s important to create an actionable strategy for exiting. In this week’s class notes we will walk you through how to develop an effective exit strategy.
What is a New Business Exit Strategy?
An effective new business exit strategy works to maximize the value of your business; and minimize the risk associated with doing something new. Having a documented strategy in place is the best way to protect your company, your reputation, and ensure a clean transition if there is a need to pivot away from an initial course of action.
How do you create the New Business Exit Strategy?
Consider ways to pivot out of a new business venture that serves to add value and mitigate losses. Use this checklist as a starting point for creating your exit strategy.
- Pivot to tandem: New business is not sustainable as a stand-alone, so bundle it with existing business line
- Pivot to value add: New business is not sustainable as stand-alone, so it’s offered as freebie, or discounted to attract new customers
- Pivot to community value: New business is not sustainable as stand-alone, so it’s offered to community and promotes brand awareness
- Discontinue: New business venture is not sustainable and requires abandonment
How do you leverage your New Business Exit Strategy?
Use the following information as a guide when building your new business exit strategy checklist:
1. Set an evaluation timeline
When starting something new there will always be bumps in the road, however this timeline should be within the first 60 days of launch to ensure timely course correction is made when needed. The next evaluation should be set for 30 days later to determine additional course correction and evaluate what efforts to continue, and what pieces should be scrapped.
2. Set a risk tolerance
The spectrum of response to the financials for new business ventures is influenced by your risk tolerance. The spectrum ranges from “I’ll risk it all to make this work,” to “if we lose more than $500, let’s abandon ship.” Most men business owners fall on the far ends of the spectrum, but women business owners often fall somewhere near the middle. This creates challenges when it’s time to determine the next right step. Setting a defined and measurable risk tolerance at the start helps guide future decisions. For example, consider setting your tolerance as a percentage over your start up budget. If that budget is $5,000, and your defined tolerance is 115%, then if the effort exceeds the budget by greater than $750 that would trigger a review of the effort.
3. Define quantitative triggering events
The most common financial metric for a new business venture is a break-even analysis. In short, you calculate how much revenue is needed to cover your initial sunk costs and ongoing expenses. The length of time to achieve break-even varies by industry, however, do some research on the typical timeline for your industry and evaluate your new venture using that time frame.
4. Define qualitative triggering events
An effective exit strategy does more than look at the dollars involved. It should also consider the qualitative factors that affect your quality of life. Consider outlining requirements for hours of sleep, eating habits, and quality time with loved ones. When those requirements are not met, that should trigger an evaluation and course correction for your business venture.
5. Present the new venture as a limited time offer
Major corporations often introduce a new flavor for a “limited time only.” This approach is intended to allow the organization to do love test marketing of their offer, without making a long-term commitment to their customers. This approach provides the ability to pursue new ideas and protect your business’s reputation in the event your new “flavor” needs to be discontinued.
Using these steps, you can craft your own exit strategy and know when and how to use it. Drop us a mention on IG @theupgrade.u to let us know you’ve completed your homework. Contact us at info@theupgradeu.com with questions about your new business exit strategy.