When it comes down to the exit strategy for your franchise, there is a stark dichotomy between how you leave: with a profit or with a loss. All businesses, particularly those that have been incorporated, are strongly urged to have an exit strategy. But what is an exit strategy and how does it affect your franchise?
An exit strategy is merely the plan you have for getting out of the business. It can be your plan for selling your business or it can be your plan for closing your business down if you are not meeting your goals for any reason. Every business must have an exit strategy not only so that they can logically plan their descent, but also so that they can have enough funds to either sell or close the franchise. Read on for more information about how to close with a profit and what happens if you close at a loss.
Closing with a profit
All businesses want to close with a profit. Who wants to spend their time and money working for a business that merely drains them of funds and does not return the investment? There are two ways to close with a profit: selling and shutting down.
If you sell your business, then you are selling a package that includes your internal and external operational materials, marketing/advertising plans and client list. You are often also selling your customers and your employees. Make sure that you sell to a buyer who will treat your baby with the same respect and seriousness that you have.
If you shut your business down, you have more considerations that simply selling it. You need to take in mind the well-being of your employees and the demands of your customer base, if you have a strong customer base. You will also need to figure out what to do with the materials that you have bought or rented. Do you sell them? Do you rent them out? Do you give them away? If your business is incorporated, then the answers to these questions will be simple; all incorporated businesses demand that the business have an exit strategy.
Closing with a loss
If you have created a sound-proof exit strategy during your incorporation, then you should never close your business with a loss unless the business was doomed from the beginning (ie: no customers even came). Stick to your exit strategy and you will leave before you are forced out do to insufficient funds.
When to leave
The hardest part of any business is knowing when to leave. Ideally, you would leave when you're business is in a position to leave with a winning hand. Your exit strategy should outline what to do in any situation so that you don't continue working to grow the business if you are out of funds. Many times, business owners have more heart and passion about their business than they do planning. That's why it's important when you incorporate your business to think strategically and pragmatically about when a good time to plan your exit is. Does it happen when you have only $40,000 cash flow left in the bank? Or does it happen when you have none? Keep in mind that zero payroll means zero employees and no one wants to go through the pain of shutting a business down on his own.
