Exit Planning and Exit Strategy in Business: What You Need to Know
In the business world, the terms "exit plan" and "exit strategy" often emerge when entrepreneurs or investors contemplate divesting from a venture. Though they might seem synonymous, they have distinct implications:
Framework and Granularity:
Exit Strategy: Think of this as the aerial view or a bird's eye perspective. It presents the overarching method an entrepreneur envisions to step away from the business. Typical strategies could range from selling the venture, launching an IPO, merging it with a different entity, or ensuring its continuity through generational transfer.
Exit Plan: This is the ground-level action plan. It embodies the selected exit strategy and breaks it down into actionable tasks, timelines, and protocols. It addresses finer details such as the enterprise's worth, financial outcomes, potential inheritors or acquirers, and the operational aspects of the transition.
Chronology:
Exit Strategy: Often conceptualized during the early phases of a business, it provides a distant, future-focused direction.
Exit Plan: This is about the 'now and next'. More immediate in nature, it evolves with the business's journey, adapting to changes in performance metrics, market landscapes, or company objectives.
Aspect:
Exit Strategy: Centers around the questions of "what" and "why" – pinpointing the mode of exit and the rationale behind that choice.
Exit Plan: Answers the "how", "when", and "whom" – elucidating the mechanics of the strategy’s implementation, its timing, and the key players in the transition.
Objective:
Exit Strategy: Serves to harmonize the entrepreneur's long-term vision for the business with their individual goals, clarifying the eventual pathway for their business involvement.
Exit Plan: This acts as the safety net, ensuring the transition follows the exit strategy seamlessly, with the least upheavals, fulfilling the entrepreneur's aspirations, be it financial or legacy-related.
The exit strategy and exit plan function symbiotically in a business transition. Where the exit strategy sketches the grand picture, the exit plan fleshes out the intricate strokes to bring that picture to life.
Framework and Granularity:
Exit Strategy: Think of this as the aerial view or a bird's eye perspective. It presents the overarching method an entrepreneur envisions to step away from the business. Typical strategies could range from selling the venture, launching an IPO, merging it with a different entity, or ensuring its continuity through generational transfer.
Exit Plan: This is the ground-level action plan. It embodies the selected exit strategy and breaks it down into actionable tasks, timelines, and protocols. It addresses finer details such as the enterprise's worth, financial outcomes, potential inheritors or acquirers, and the operational aspects of the transition.
Chronology:
Exit Strategy: Often conceptualized during the early phases of a business, it provides a distant, future-focused direction.
Exit Plan: This is about the 'now and next'. More immediate in nature, it evolves with the business's journey, adapting to changes in performance metrics, market landscapes, or company objectives.
Aspect:
Exit Strategy: Centers around the questions of "what" and "why" – pinpointing the mode of exit and the rationale behind that choice.
Exit Plan: Answers the "how", "when", and "whom" – elucidating the mechanics of the strategy’s implementation, its timing, and the key players in the transition.
Objective:
Exit Strategy: Serves to harmonize the entrepreneur's long-term vision for the business with their individual goals, clarifying the eventual pathway for their business involvement.
Exit Plan: This acts as the safety net, ensuring the transition follows the exit strategy seamlessly, with the least upheavals, fulfilling the entrepreneur's aspirations, be it financial or legacy-related.
The exit strategy and exit plan function symbiotically in a business transition. Where the exit strategy sketches the grand picture, the exit plan fleshes out the intricate strokes to bring that picture to life.