If you haven’t thought about leaving your business, you should do so, because it affects today’s decision making. Your plan for leaving your business is known as an Exit Plan, and yes, even Solopreneurs have them. It’s helpful to know what your plan is because you need to optimize your activities toward your goal.
Before we get into the three exit strategies, realize that many traditional business exit plans–i.e. IPOs, mergers, acquisition, etc.–are off the table for Solopreneurs, leaving you only with three viable options.
Think of Solopreneur Exit Plans as a play off of The Three Little Pigs and their homes.
The first pig builds a straw house because his business is temporary and he will never have the opportunity to sell it.
The second pig builds a stick house because he’ll be able to use the sticks later to rebuild his house in a different place
The third pig builds a brick house because he is going to build his Solo business into an agency or firm which he plans to sell.
If you knew your house was going to be blown down, you would move everything out of it. The same thinking applies if you know one day you’ll shut down your business without any compensation for it. You need to manage your business not for the future payout but for the payout today. This is the majority of Solopreneurs’ Exit Plan.
A traditional small business hoping to sell (or IPO) in the near future will reinvest back into a company to increase cash flow, but as a Solopreneur with a premonition of your house blowing over, you’ll want to steer your cash away from asset-building to long term security via an owner’s draw. How it affects your decision making:
In the back of many Solopreneur’s heads lay a thought that they might be able to sell their company as is. But to who? This is a tough one for knowledge-based Solopreneurs, because your company and personal identity is as intermixed as the chocolate and peanut butter in a peanut butter cup whereby you can’t just extradite your personality (coach) or your skill set (freelancer) from your brand.
Maybe you’ve done freelance web design and sees more opportunity in web consulting. Or you’re a restaurant accounting consultant (setting up and managing bookkeeping systems), who sees more lucrative/enjoyable opportunities in restaurant turn-around or restaurant brokering. This exit plan shows that you’re not out of business entirely, but simply out of the current mold. If you’re currently in an ultra-competitive industry, accumulating in-depth experience and a deep contact list, but struggle with poor economics, this might be a good opportunity. If this is the case:
While we’ve heard many stories of successful corporate suits down-sizing to become Solopreneurs, there are a fair amount of people who start as a Solopreneur out of resource constraints and scale up later. Growing your Solo business into a firm or agency isn’t a bad option if you don’t mind managing others. Then you can start looking at traditional business exit plans like selling your business to the highest buyer.
This exit plan works better in freelancing roles where hard skills are needed (i.e. graphic design) than softer roles (i.e. startup coaching). Many web designers start by themselves, hire part time work to full capacity, and then make the move to moving into the whole W2 employer thing. What you need to do:
Which little piggy are you? Why?