Exit Signs: Is it time to exit your business? How do you know? Signs it could be time to sell, close, or transfer your business.
Entrepreneurs know how to get into business, but many aren’t sure how to get out of a business. Or more importantly, they aren’t sure when they should exit their business.
The signs may be right in front of you. Here are some things to consider. Do any of these exit signs resonate with you? If a lot of them are present, it may be time to reevaluate your exit strategy. (You do have one, right?)
INTERNAL SIGNS
Internal signals involve things that are happening inside your company and are largely within your control.
Financials
Profit You are not turning a profit and don’t have a clear path and timeline to start.
Cash You are running out of cash and can’t get more quickly.
Unit Economics Your unit level economics are negative, meaning you can’t turn a profit on a single unit of what you’re selling.
Shrinking Your revenue and/or profit is gradually shrinking over time.
Death Spiral You are in a death spiral of cutting costs leading to reduced sales, customer retention, efficiencies, or employee morale
Bad Events Events like a lawsuit, equipment replacement or technology upgrades that require a ton of cash but don’t result in any upside like revenue growth or efficiency gains.
Burn Out
Stress You have constant stress, anxiety and/or depression.
Hours You have been working long hours over consecutive days for a long duration. Or you may be spending far too few hours at work and it’s hurting the business.
Bad Behaviors You are gaining weight, abusing substances, gambling or doing any number of negative things.
Low Energy You are having trouble getting out of bed or working a full day. You feel down and uninspired. Your employees, customers, and vendors are starting to follow your lead.
Trapped You don’t see a way out, you feel trapped and wish you could hit the hyperspace button and land somewhere totally different without the business holding you down.
Unfulfilled
Bored The work is repetitive and not stimulating. It’s just boring and you’re watching the clock wanting to go home to do more enjoyable things.
Skill Deterioration You are not learning any new skills that interest you or have a high market value.
Knowledge Deterioration You are not acquiring any new knowledge that is of interest to you or that has a high market value.
Regrets You often wonder if you’ll regret staying in the business versus trying something new.
Situational
Health You are having health issues that require a long time to work through and/or have uncertain consequences.
Family You have family related issues that will take your time and focus away from the business.
Spiritual You have a fundamental change in your life view and the business is not in alignment.
Succession Plan You don’t have one. If suddenly you couldn’t work, the business would be in serious trouble.
EXTERNAL SIGNS
External signals involve things that are happening outside your company and are largely outside of your control.
Market Changes
Demand Is shrinking for your offering and there’s no viable pivot you can make to increase sales.
Disintermediation You are a middle man and the industry has changed to remove you from the equation.
Technology The required investment in technology to stay competitive is becoming too great for your business.
Consolidation The industry you play in is moving toward 2-3 major players who have either acquired or forced smaller players out of business.
Labor The cost to pay your employees is growing because you happen to be somewhere with many high paying jobs and a strong growing economy with a competitive job market.
Real Estate Like labor costs, your lease is getting more expensive due to supply and demand in your area.
Ecosystem Your suppliers or vendors had a disruption that affected you resulting in like higher costs. Other items include product/service quality degradation, management changes, government changes (tariffs, taxes, regulation) and disintermediation.
Competition
Many If the barriers to entry are low, expect lots of competitors to enter your market and erode your share.
One A big company with a lot of cash decides to enter your market.
International You are seeing more products or services coming from countries where labor is cheaper and your customers are ok using overseas companies.
External Environment
Legal New laws making it more expensive or maybe impossible to run profitably or stay compliant.
Labor You can’t find good people in your area and you can’t outsource the work.
Government Your state or local government changes something that harms your business.
Natural A disaster has made it impossible to continue operations and recovering isn’t viable when you analyze what it would take to rebuild.
Consider this list a starting point for determining whether or not you need to look into shutting down your business. Did you answer yes to just a few? Are the feelings or situations temporary? Is there a pattern that keeps repeating itself? Saying yes to a lot of these exit signs could mean it’s time to exit your business. Saying no to most of these could mean you just need to make some adjustments to get things on track again. Understanding the lifespan of your business is key to knowing when it’s time to sell, close or transfer your company.
Starting a business is hard work and challenging. Exiting your business is hard as well. You were driven to become an entrepreneur, acquiring the skills to exit your business will free you up to do the next big thing in your life.