How to know when it's time to exit a business

CMR Risk & Insurance Services Inc. > Blog > Business > How to know when it’s time to exit a business
Posted by: CMR September 26, 2022 No Comments

No organizational leader wants to hear from stakeholders that if revenue doesn’t pick up, there is the potential for shutting down, especially when the sales team just reported back a decrease in their pro forma.

That leader must ask the question of why, analyze current deals, speak with prospects and partners, and come to a solution to increase revenue, even if that means a pivot or offering new business lines. After all, every industry changes and if an organization has not recently evaluated the market needs and demands, then maybe this is the time for a change.

But what do you do when you have evaluated the market, pivoted and are doing everything right but you’re still not seeing the uptick in revenue?

With the fear of an upcoming recession, many organizations are facing this exact dilemma. Operators are cutting out third-party vendors, tightening their belts, trimming the fat, and doing everything in-house with sometimes a skeleton crew.

This was exactly what I had to analyze prior to closing our organization. As a leader, I felt like a failure to the team and our industry. The team and I had to report back to the stakeholders our findings of our current efforts, even though they were lackluster results. The stakeholders then had to evaluate their ongoing interest in supporting our mission, vision and purpose.

Creating an exit strategy

When those stakeholders no longer want to support your business or organization, it’s time for an exit strategy. The exit strategy is just as important as your strategy for entering your industry. If done correctly, relationships stay strong and the company name will become a legacy, remembered for what it did accomplish. If done incorrectly, you are at risk for lawsuits as well as state and federal Department of Labor claims. Employees, contractors, stakeholders, the company name and the industry could suffer.

If you have never closed down a business, the learning curve is immense, but the knowledge becomes another tool in your toolbox by doing it. Many organizations admire leaders who have the authenticity and guts to execute a proper closure and by doing it the morally right way, it can open up future opportunities for the employees and yourself, plus it’s good business.

Communicating during a closure

The biggest lesson I learned from the recent closure is that communication is key and that many people need to hear something six times or more before actually understanding what is happening. This means communication between the employees and the stakeholders must be precisely aligned so there are no fumbles or mistakes made during the closure.

I advise hiring a public relations firm or communications firm to step in and help with the narrative’s messaging to partners, clients, prospects and the media about the closure. If funds are non-existent, then seek out a firm willing to do pro bono work. Many are open to that in order to build their portfolio, or ask a business executive who has done it the right way before for help.

In my opinion, every organizational closure is unique with its own set of considerations on how the leaders want to close, but there are many standard tasks that need to be completed when closing any business.

  • File a dissolution notice.
  • Notify employees and pay them any owed monies or contracted severances.
  • Count inventory that could be liquidated.
  • Pay outstanding taxes, vendors and contractors.
  • Close your bank accounts.
  • Cancel your business name.
  • Remove everyone who has access to social media accounts.

No matter what the situation is for the closure, treat your employees with respect. Let them know why the company is closing, what you can do to help them, and what you’ll need from them during the transition. Be direct in your communication, be personal, be available and honor the company commitments. Keep your partners informed, consider their ongoing needs, and maintain your focus on quality execution in order to close the business efficiently and effectively.

Source: https://www.propertycasualty360.com/2022/09/26/how-to-know-when-its-time-to-exit-a-business/

Author: CMR

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