Start with the End in Mind: Why an Exit Strategy Matters from Day One

About 10 years ago, I was part of a small team that launched a software company. From the very beginning, we were focused on selling it. That focus caused us to be very intentional about a number of things that might have caused a little pain in the beginning but paid off in the end. When you're small and trying to land those early customers, it can be challenging to hold firm on your Terms and Conditions, payment terms, IP rights, etc. But when you have the end in mind, it makes it a bit easier. This experience taught me the value of thinking like a buyer from day one and making decisions that would maximize the business’s value over time.

Introduction

When you launch or buy a new business, it’s easy to get caught up in the excitement and day-to-day challenges. However, from day one, you should be thinking about your exit strategy! It might seem counterintuitive to think about selling before you’ve even really started, but having a clear exit plan can significantly influence the success and growth of your business.

Benefits

An exit strategy isn’t just about planning for the end; it’s about making smarter decisions along the way. By having a clear vision of your ultimate goal, you can:

• Make Informed Decisions: Knowing where you want to end up helps you make strategic decisions that align with your long-term goals.

• Improve Operational Efficiency: Streamlining processes and building robust systems from the start makes your business more attractive to potential buyers.

• Maximize Value: Focusing on growth areas that increase your business’s value over time ensures you get the best possible return on your investment.

Why Maximize Value from Day One?

Why wait until it’s time to sell to maximize the value of your business? Adopting an exit strategy mindset from the beginning means you're always working towards creating a business that's not only profitable, but also highly attractive to potential buyers. This approach ensures that when or if you decide to sell, you’re not spending weeks or months—or tens of thousands of dollars—cleaning up things.

Think of it like selling a house. When you go to sell, you might paint it, replace the carpets, and upgrade the appliances. But why wouldn’t you do those things for yourself while you’re living in it? Enjoy the benefits now and keep your property in top condition. The same principle applies to your business. Keep it in optimal shape for yourself, and you'll be ready for a smooth, profitable exit whenever the opportunity arises.

Setting Goals and Reverse Engineering Success

Starting with the end in mind is also about setting clear goals and then reverse engineering how to achieve them. By defining what success looks like at the outset, you can map out the steps needed to get there. This involves identifying key milestones, setting actionable objectives, and continuously aligning your daily operations with your long-term vision.

Think Like a Buyer

Thinking about an exit also has the benefit of seeing your business from a buyer’s perspective. This means anticipating where a potential buyer might challenge your value proposition. Are there key man risks, customers without contracts, or outdated equipment? You were probably just a buyer yourself! You looked for those weaknesses. Keep looking through that same lens and build a business any buyer would want and would want to close fast and for top dollar.

Practical Steps to Maximize Value

When I acquired TapSnap last year, we took several key steps to build a valuable business from day one. Here’s what we did and what you can do too:

• Maintain Clean Financial Records: Keep accurate and detailed financial records. Potential buyers will scrutinize your financial health. We retained Appletree Business Services to manage our chart of accounts, books, and tax preparation—ensuring everything is in top shape.

• Streamline Operations: Implement efficient processes and systems. This not only improves profitability but also makes your business more appealing to buyers. We streamlined everything at TapSnap. Our response to incoming leads is automated, allowing us to reply within minutes, no matter the time of day.

• Focus on Growth: Invest in areas that drive sustainable growth, including marketing, product enhancement, and customer service. We rewrapped a vehicle, upgraded equipment, and leveraged affordable software tools to enhance the experience for prospects and customers at every touchpoint.

• Build a Strong Team: Develop a capable and motivated team that can run the business independently of you. This increases the attractiveness of your business to buyers. I was fortunate to hire @Tehan, who has been instrumental in building our foundation for growth. Our next new hire starts 7/1.

• Get to Recurring Revenue: Even in our photo booth business, we are experimenting with subscriptions for corporate clients to create a steady stream of recurring revenue.

• Establish Strong Relationships: Cultivate strong relationships with customers, suppliers, and partners. A solid network adds value and stability to your business.

By focusing on these practical steps, you can build a business that’s not only successful in the short term but also highly attractive to potential buyers in the long term.

Conclusion

Thinking about your exit strategy from the start isn’t about being pessimistic; it’s about being strategic. It ensures that every decision you make is aligned with your long-term vision, ultimately leading to a more successful and valuable business. By maximizing value from day one, you’re not just preparing for an eventual sale—you’re building a better, more robust business for yourself.

Are you considering buying a business or have questions about maximizing value? Reach out to me—I’m here to help!