Exit Strategy, and Why We All Got To Have It

Exit strategy is an integral part of a management function and nobody in their right management mind would ever omit such basic concept. Exit strategy is known by many as the penultimate or the very lastest (is that even a word?) thing that a manager would undertake in their corporate life. It’s not far from the truth though, as exit strategy will always means that, exit, the last step. However, every management book author, every educated manager, and every entrepreneur out there will always consider and managed exit strategy at the beginning of their career or at the start of the business. How is this so? Are they already considering defeat even at the earliest stage? Well this is a defining NO.

Exit Strategy For The Business

Linda Pinson, the author of “Anatomy of a Business Plan”, offers an excellent analogy why exit strategy has to be implemented right at the planning stage of the business itself. She wrote about a runner needs to know where he/she is going to finish the race. This is an excellent analogy for me because it exemplify what exit strategy really means. Well logically speaking using the analogy from the author, the runner capability obviously is limited, they have to know the range of the track first and adapt their running pace to win the race. If they didn’t know about the length of the track, the runner will exert their maximum force and got exhausted nowhere near the middle of the track. A good runner will spread their pace according to the length of the track, and keep a small amount of stamina for that last stride.

Business world is akin to runners on the track field, in that, each company has its own capability that can only be spread so much in its entire life span. Therefore one must apply exit strategy at planning phase of the business to accurately apply the overall strategy during the business life span. This is also what Linda Pinson wrote on her book, she even goes to length by defining that exit strategy defines a business financial plan, taxation plan, even its overall management decision. A very nice book indeed, I suggest every aspiring entrepreneur to read her book.

Exit Strategy doesn’t just apply to the overall business world, but also applies to the people who work there. One very good example of how exit strategy is used in the employee level of corporate life is the succession planning. How often in your corporate life that a good manager left from the company you are working for and there are no suitable people to replace him/her? My guess is… A lot, especially in a developing country such as mine.

Succession planning in a way is an exit strategy for the company who employs that person. Without proper succession planning, most often than not a company will lose its asset and will distort its daily balanced function.

Like some old guy (me) said, “a great manager is hard to groom, but a great manager is harder to find”. Basically, what I meant is that, it is easier to educate a good manager to great from within the company than to find a great manager from outside of the company. Pardon my lack of source, but on my MBA class, grooming manager from inside of the company for western companies are more preferable than just to find it from outside of the company. As this has several advantages being:

  1. That person already knows the culture of the company.
  2. He is already known by the people who will work for him.
  3. Company-client-media relationship will be intact because there are no need to have another introducing sequence between all three.

But somehow, some company still thinks that people who work for them are just people who work for them. They are not an asset by any long shot, nor they are an integral aspect of the company. Therefore, when somebody quits, the company will just say “ow, it’s the natural cause of things” or “that’s good, employee regeneration/fresh blood is always needed in the company”. To me, this is stupid and the wrongest concept of seeing employee as a tool rather than an asset. This actually happened on my current workplace, I’ll tattle about it on the example section along with the example of exit strategy for the business world.

Exit Strategy For Us

That’s what exit strategy means if its seen from the context of the business, but one can see exit strategy in our own life, out of the hustle and bustle of the corporate life. When we work for somebody, then our fate of working there is left to chance because simply we are just drones. Out of that 3rd “heat” or the inevitable such as economic downturn, natural disasters and so forth, we couldn’t be 100% sure of our future in that company. Out of the reasons stated above, we can get fired as soon it happens.

This is actually something that I wanted to share, it’s not based on any books or any classes that I have been into. Therefore accuracy is questionable but personally I think it’s something that is nice to know, so here goes.

We have in our life, multiple planning, no? Well, you ought to have it. In my lifetime, I’ve failed 4 of my biggest plan in my life. Luckily, I always have an exit strategy handy when all of those plans didn’t work out. For me, hatching a plan A, plan B, through plan Z will be never enough in our lifetime. Life will always change for the best or for the worse. To establish many plans for our life will be tiresome, not counting you have to keep in track and appropriately launch each and every plan for any given situation. For that reason, we only need to devise several solid plans that we can oversee with ease and then we devise an exit strategy.

The exit strategy in this context is not relevant to the mentioned business world application of the above, but rather, exit strategy in our life refers to hatching up another set of plan when the first set of plan didn’t work. For example, when you work on some company, you will have some plans devised to get promoted, yes? Of course… Then you planned to get the boss’s heart by buying him gifts, but he can’t be “bought”, so you buy his/her right hand man gifts to win favor so they will talk sweet things about you to the boss. That’s plan A and B right there. But what if your boss and his/her right hand person can’t be bought, and there’s a termination meeting, and… it’s so happen to be, your name is on that termination list? Well, this is the time when you got to have an exit strategy handy.

Exit strategy in this context means that you got to have another means of what to do after the inevitable happens. Exit strategy is not necessarily hard to hatch, because mostly it involves finding a new path your life and you creates the plans after you step into that path first. In the case of said example above, finding a new job or create your own business is the exit strategy. While it’s quite difficult setting up for a business, the subsequent plans can be made after the business has been established.

Again, this is a personal view of exit strategy. However, having some sort of getting out plan from your existing condition warrants a careful thought of exit strategy.

The Witty Examples

I’ve written about how exit strategy should be considered at the beginning of the planning stage of a business, and now let’s take a look at some examples.

A practical advice from Businesslink stated some exit strategy outcomes from different perspective of businesses. The article also further strengthen Linda Pinson’s book that exit strategy determines the overall long term strategy of the business. Basically, if you plan your business right, at the end of it you have to sell it for profit, groom or pick a successor for it, or just abandon it. Exit strategy determines those three outcomes from the declining phase of a business or your life cycle.

My step mom owns a quite profitable small bakery shop. However, she doesn’t want to expand the business by opening up branches or even introduce new bread or cakes. Why is this so? Because her exit strategy is to sell the shop when she is no longer able to run it anymore. An excerpt from Entrepreneur.com probably describes what my step mom is doing with her bakery, “a money in the wallet is no longer a money in the business”. This is because my step mom is taking any profits from the bakery straight to her wallet, not intending to reinvest them back to the business. On Entrepreneur.com article, this company is called a lifestyle company, because well… Its sole existence is to support the lifestyle of the owner.

Another good example of exit strategy or the lack of said thing is in the place where I worked for. So I work in a… Well, that would be telling isn’t it? Anyway, I once worked for one of the largest publishing company in my country as a journalist/reporter/editor/talk show host/desktop artist/superman. My boss has just been recently promoted to vice general manager for the division, but one peculiar thing is that, even after his promotion, there are nobody who inherently succeeds him. He is now a vice general manager for the division but still, every managerial aspects must go through him first. Essentially, the higher ups failed to implement exit strategy/succession planning for my boss, because he now essentially works in two place at once although his focus is still being vice general manager of the division. Because of it, work condition is chaotic at best, red tapes are getting longer and work paces become awfully slow.

Now, succession planning is also an integral part of exit strategy, because if not, then what happens in my workplace will be common in any workplace. Succession planning as an exit strategy on my step mom’s bakery could work if she wanted the shop to go 2nd generation. However, as my step brother is enjoying his stock broker related high lifestyle, and my father needs more assurance of my capability, the bakery would most likely in 95% confidence interval be sold to somebody.

There you go, exit strategy and why we all got to have it.

Sources and recommended readings:

Anatomy of a Business Plan by Linda Pinson

Ivan Hoffman’s exit strategy

Business link practical advice for business

Entrepreneur.com: Exit strategies for your business