If youre a business owner, the biggest mistake youll make in preparing your exit strategy is not starting early enough. The best exit strategies are formulated when you start the business.

Its the same with any investment. The most successful investors go in with an exit strategy. That way they know when to come out and what profit they expect to make on the overall deal.

Many business owners begin their businesses with plans to grow and projections out into the future. However, most of those who begin their business dont put in place an exit point for the future. They may make some vague statements about what value they want their business to achieve but they dont set that as a true target. They dont treat the business as an investment, they treat it as an ongoing project.

The private equity world understands this and when they make an investment in a business they expect to make a specific return on their investment. Most firms will make their investment for 3 to 5 years and expect a return of at least 2.5 times their money.

If you see your business as an investment then there will be a number of differences in the way you approach it:-

1. Youll see the value in creating and keeping long term, loyal customers

2. Youll plan the business so that costs are minimized and profits maximized

3. Youll create systems and processes that are repeatable

4. Youll build a management team who can run the business without you

5. Youll create a focused niche business that will be of value to others

6. You'll have a specific target valuation in mind from the beginning

7. Youll have a simple capital structure which minimizes tax and makes the business easier to sell

When you adopt this approach you get two main benefits. Firstly, your business will be a lot more efficient and effective, which will serve your customers and your staff. Secondly, it will be a lot easier to sell when you reach your target because youve been preparing it from the start.

Although its likely youve already made the mistake of not starting your exit planning early enough, its still not too late. You can start today by writing down what your exit plans are. Do you intend to keep your business as a lifestyle business until youre ready to just quietly end it, or do you plan to get out sooner and achieve the maximum value for selling it?

Once youve decided what your objectives are you need to step back and look at your business and view it as if it were another product or service that you planned to sell. How would a potential buyer view it? How saleable is it? How easy would it be for you to extract yourself? What do you think someone would be willing to pay for it?

Once youve answered these questions then youve begun the process. Theres still a long way to go but if you leave it any longer then you may find you reach the point where it is too late. Start building your exit strategy today.