9 minute read

Differences in Business Growth and Exit Planning: The Nuances That Add Leverage

You’re a business owner who understands that the moves you make today could make or break your future exit.

You’re not just looking to build a company that pays the bills. You want to maximize its value, whether that's selling it for the strongest valuation, or holding onto a passive machine that keeps putting money in your pocket.

While growth and exit planning are part of the same journey, there are subtle differences that will give you a massive difference in payoff when you get it right.

How Growth and Exit Strategies Differ

Growth and exit strategies tend to operate on different timelines. Business growth is an ongoing process with a shorter feedback loop. You implement a strategy, measure results, and iterate.

While business growth is about the 'what'—what metrics to improve, what tactics to implement—exit planning dives deep into the 'why.' Exit planning helps distinguish the forest from the trees; focusing on how every operational choice contributes to your long-term goals (or fixes what may be unintentionally hurting them).

Building a Sellable Business: The Ultimate Freedom Whether You Sell or Not

With exit planning, the goal is not just to create a thriving business, but to build a sellable asset that can operate without you. This means more freedom, even before the exit. You could go through this process and be so satisfied with the outcome that you choose not to sell and just be a passive owner or take a sabbatical, knowing that your business is thriving and can be competitively sold whenever you want.

Exit Intent: The Right Questions

In exit planning, a sale becomes the guiding light. The questions aren’t just concerned with growth like “How do we 2x quarterly revenues?” anymore.

It shifts to:

• How does improving quarterly revenues fit into our two-year exit strategy? Where are those quarterly revenues coming from? Are they sustainable and replicable to handoff to a buyer?
• How have we diversified our customer base to reduce client concentration?
• How have I created systems around sales and marketing to generate consistent revenue?
• How am I organizing the financial records so they can be easily understood by a potential acquirer?
• How is the business differentiated against competitors?
• Are clients on contracts? Are these contracts transferable?

Notice the differences in how exit planning asks questions.

Usually, they come from the perspective of what a potential buyer will ask, and the depth that they will drill into the business to see if it’s worth purchasing.

By approaching it through their lens, this shifts the focus onto your endgame to make sure every move is in line with the long-term objective—maximizing the value of your business in every way.

Not All Financial Growth is Equal

Effective exit planning considers more than just net profit to determine value—it weighs other assets like IP, goodwill, and brand equity. Unlike traditional business growth, which may overlook these nuances, exit planning takes a 360-degree view of a valuation from the eyes of an acquirer.

While business growth and exit planning both look to streamline operations and find profitable niches, they can do this in different ways. Some business growth puts velocity first—which can involve tactics that are highly reliant on the owner or aren’t repeatable at scale. It can also blur the profit margin and bottom line as some expenses are experimental or inefficient for the sake of speed.

Exit planning, on the other hand, tends to focus on the long-term lens of revenue that is reliable and transferable. These approaches may include paid traffic funnels, SOPs for training sales teams, SEO investments, and other approaches that are building a repeatable machine that can pass to a new owner. Transitioning from growth mode to sell mode is about calming the storm—this allows for an accurate view of profitability without the expenses and income from ‘experimental’ rollouts.

Scalability is Made, Not Born

Business owners often turn to business growth to help foster a strong team and attract talent. 

The problem here is, the owner is usually at the center of it all: learning how to be a better leader is great in the short term, but it ties them even closer to the business as a foundational piece of the culture. This can set the founder up to fail when it comes time to sell, or makes it much harder to unweave themselves.

Exit planning, on the other hand, tends to look at how leadership can be cultivated from within—geared toward building the business to thrive without the founder involved. 

A business with strong internal leadership is attractive to potential buyers, and tends to bring higher multiples. This is why good exit planning will address the following:

SOPs

Even large companies fall short on this. Exit and growth planning both focus on creating documented systems, but exit planning looks at this more rigorously, making sure they have been created for every internal and external process and easy enough for a brand new hire to follow.

Roles & Training

Since both approaches are geared toward scalability, they aim to define team roles as clearly as possible. While there is a lot of overlap here between exit and growth planning, exit planning tends to put more emphasis on cross-training and accountability because this mitigates risk for an acquirer. Think about who your team members come to when they have a question or need training. If it’s you, that needs to be changed. Growth planning may not prioritize this as much, but exit planning aims for at least two people on the team to be cross-trained for risk reduction.

Management

Oftentimes, growth planning puts the owner in the driver’s seat of scaling. But exit planning carves out the importance of adding growth managers to the team, making sure they deeply understand the north star of the company and can effectively continue growing the business in your absence. Hiring a CEO or president for the business, weird as it may seem, empowers you to choose who is steering the ship so it can thrive without you. However, exit planning tends to take a more assertive approach here because a different owner is the endgame—as weird as it sounds, the goal will be to make the owner highly dispensable, allowing someone else to easily step in.

Risk Mitigation

Business growth addresses risk, but exit planning usually does it more rigorously. By knowing how potential buyers will conduct due diligence, exit planning will prepare you for the level of scrutiny that will happen. By doing so, you remove potential blockers that could lower your valuation. Here’s what this might look like.

Accounting

Naturally, growth planning will place a heavy eye on revenue and velocity. Exit planning, with a slightly different priority, pays special attention to the story that financial reports are telling—for example, are there lumpy fluctuations that need to be explained? Can these be resolved with better financial accounting? Exit planning aims to create an accurate financial snapshot of the business so the income is consistent to a buyer entering with fresh eyes.

Economies of Scale

Exit and growth planning both aim to optimize margins without proportional increases in overhead. While these are done very similarly, exit planning emphasizes risk reduction—meaning fewer rollouts of new offers.

Non-Material Assets

As the owner, it’s easy to forget the intangible value you’ve created in your company. Growth and planning are both mindful of protecting this. With growth planning, it’s to adequately protect your IP as the company increases in scale, while exit planning looks to safeguard the IP while making sure it is transferable. Exit planning also analyzes all the intangibles that add to the value, giving you a competitive advantage over other acquisitions that a buyer may be considering.

Also, since exit planning is geared toward selling, it can prime you on tax implications and legal requirements, usually by connecting you with experts in each field. The timing of your exit, the structure of the deal, and the type of payout— all of these involve strategic planning to maximize your takeaway.

Conclusion / TL;DR

So here you are at the crossroads. On one hand, you have business growth, which is like a GPS for navigating your current terrain. On the other hand, you have exit planning, which is like a time machine showing you the end of the journey.

Business growth helps you win the next inning; exit planning helps you win the whole game. With exit planning you aren’t just setting your business up for success—you're setting yourself up for financial and personal freedom.

As someone who’s built a company, you’re no stranger to investment. The question now is: where do you want to place your compass for maximum ROI?

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