When you’re building a home, it’s both smart and legally required that you ensure that every room, floor, or structure has at least two doors, preferably on opposite ends of the space.
Why? Because, if something like a fire or other damage makes it impossible to get out one way, there needs to be another exit available for people to use. Having multiple available exits is not just a matter of convenience, but a matter of safety and common sense, too.
This well illustrates why restaurant owners need to consider establishing an exit strategy — a plan for eventually leaving or selling a restaurant. It’s is a common-sense part of smart entrepreneurship, and it offers a level of safety and peace of mind to what is inherently a risky proposition.
“But wait,” you’re thinking, “my restaurant isn’t for sale. I’m not even thinking of selling right now.” That’s ok. In fact, there’s no better time than right now to become familiar with the concept of an exit strategy and to start putting one into action for your restaurant.
What’s involved in an exit strategy?
Planning an effective exit strategy will be different for every business. By nature, it has to be a customized plan that accounts for the individual company’s unique circumstances, market and industry conditions, trends, and the goals and time frame that are unique to the owner(s). There’s no template you can download and fill out to establish the perfect exit strategy for your restaurant.
However, every exit strategy will incorporate all of the following elements, with appropriate variations for unique circumstances:
Goals - If you’re running a small side business that supplements a full-time income, perhaps just recouping your financial investment and breaking even is enough. If the restaurant is your entire life and it’s how you expected to put your kids through college and fund a lavish retirement, your goals are much different. Ask yourself:
- What do I want and need to get out of the business when I leave? Is it primarily a matter of profit, or am I eager to leave my mark?
- As a business owner, if circumstances changed and I decided to sell my restaurant, what would I want and need to get out of it?
- Based on the goals I’ve outlined, how much do I need to earn from the sale to be satisfied?
Timeframe - A rushed sale, or one that becomes suddenly necessary, is never in the seller’s favor. If the time frame for the sale is flexible, it puts the owner in a much better negotiating position. If it’s tight, options and potential are limited. Again, ask yourself:
- When do I want or need to complete the sale?
- How long is it going to take for me to grow the business to the point that I can realistically expect to earn at least my minimum requirement outlined above?
- If my restaurant is already at that point, what can I do to maintain that level or better going forward?
- If not, what can I do to get it there as soon as possible?
Intentions for the business - This important factor will help determine if the business is to be sold, merged with another business, set up for transition through succession planning, or simply liquidated. Consider:
- Do I expect to see the business continue indefinitely after I leave?
- Do I want my children to inherit the restaurant and keep it going after I retire?
- Or am I comfortable with seeing it dissolve, as long as it provides sufficient return?
A strategic exit plan will address all of these questions and more, as dictated by each owner’s and each restaurant’s unique circumstances.
Why is an exit strategy important for every restaurant?
These days, most experts recommend incorporating a thoroughly realized exit strategy into the business plan from the very start of any business venture. While it may seem strange to plan on starting or buying a business and, at the same time, plan how you’re going to sell or remove yourself from it, this really is the smartest way to operate in today’s fast-moving economy.
Here are some benefits of establishing an exit strategy as early as possible:
- Like a map for success - If you don’t know where you’re going, you’ll never know when you get there. An exit strategy helps define success, and provides a timetable for charting your progress.
- Aids with strategic decisions - With no planned end game, it’s easy for restaurant owners to get caught up more in the “job” they’ve given themselves rather than the long-term strategy behind running the business itself. An exit strategy keeps that endgame in view and can make day-to-day decisions more strategic in nature.
- Maintains flexibility - The initial exit strategy will likely need to be adjusted over time as circumstances change. Still, if it’s there from the start, it can provide guidance and benchmarks to use if and when unexpected events occur. For instance, a sudden death, divorce, major health problem, or required relocation can cause an unexpected early departure from the business.
Additionally, the act of creating an exit strategy — preferably with the help of professional advisors, including an attorney, business broker, accountant, and commercial real estate broker — provides a solid framework for the entire business lifecycle, which provides both practical and strategic advantages and peace of mind for those times when the day-to-day running of the restaurant is stressful.
Even if you’ve never even considered selling your restaurant, or you’re just in the opening stages of buying or starting a restaurant of your own, make your exit strategy part of the planning process now. Get the help you need to ensure it incorporates everything you want and need to get out of your commercial ventures. Like a wisely placed second door in your home, it can offer convenience, safety and security for your entrepreneurial efforts.