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“You’ll find plenty of advice on building a successful business, but people don’t talk so much about how to leave it behind. And yet there are many good reasons for wanting to exit a business. Maybe you’ve found a better opportunity elsewhere, and want to start a new venture. Maybe you want to retire or scale back. Maybe your business has just run its course, and you don’t have the passion for it any more. Maybe you need to raise cash quickly, and selling your business is the only way. Even if you don’t plan to leave any time soon, it’s worth thinking through your exit options and having a strategy in place. Each one has its own particular advantages and disadvantages.”
The past three weeks we looked at different exit strategies and ways we, as a business owner, can work on a successful handing over of our role to somebody else. Andrew Blackman wrote an accessible and interesting article on this subject, from which we looked into his suggested exit strategies, which were:
Pass the business on to the next generation.
Management or employee buy-out.
Other Options, including floating an Initial Public Offering.
In conclusion, Andrew Blackman suggests that it is best to start planning and consulting your financial advisor as soon as possible. If you start early and do it right, exiting a business won’t be a headache, but a smooth transition to the next phase of your life.
Now, an exit strategy is not only relevant in doing business and for owners of companies, but from another perspective it is of high importance in the development and humanitarian aid sector as well. Below I refer to a publication “What We Know About Exit – Practical Guidance For Developing Exit Strategies in the Field” of the C-SAFE Regional Learning Spaces Initiative* by Alison Gardner, Kara Greenblott and Erika Joubert.
A program “exit” refers to the withdrawal of all externally provided program resources from an entire program area. A program exit may refer to the withdrawal of external support from an entire program area, or it may address the withdrawal of support from communities or districts within a program area. It could also refer to the end of a program funding cycle, with an extension through a follow-on extended recovery program or a longer-term development program. And lastly, it may include a combination of withdrawal, program extension or transition. A program Exit Strategy is a plan describing how the program intends to withdraw its resources while ensuring that achievement of the program goals (relief or development) is not jeopardized and that progress towards these goals will continue. An Exit Strategy may include several scenarios or contingency plans that address unknown factors, such as recurrent droughts or the effects of a high prevalence of HIV/AIDS. Contingency plans may also include planning for further resources when it may not be possible to exit entirely from program areas.
The goal of an Exit Strategy is to ensure the sustainability of impacts after a program ends. It could also be defined in a broader sense as a program’s ‘sustainability strategy’, which could be accomplished through staggered graduation from specific project areas, simultaneous withdrawal from the entire program area, or transitioning to associated programming in selected areas.
Exit strategies, when planned with partners in advance of close-out, ensure better program outcomes and encourage commitment to program sustainability. In addition, good Exit Strategies can help resolve tension that may arise between the withdrawal of assistance and commitment to achieve program outcomes.4 Exit strategies can help clarify and define a sponsor’s role to host countries and local partners as being time limited, reducing the potential for misunderstandings and future dependency. Finally, they are critical to developmental relief programming as they inform a program’s sustainability plan or planning for its next phase. Conversely, without Exit Strategies, program transitions and exits are likely to be more haphazard.
Three basic approaches to Exit Strategies are outlined below. They are: 1) phasing down, 2) phasing out, and 3) phasing over.
PHASING DOWN. Phasing down is a gradual reduction of program activities, utilizing local organizations to sustain program benefits while the original sponsor (or implementing agency or donor) deploys fewer resources. Phasing down is often a preliminary stage to phasing over and/or phasing out.
PHASING OUT. This refers to a sponsor’s withdrawal of involvement in a program without turning it over to another institution for continued implementation. Ideally a program is phased out after permanent or self-sustaining changes are realized, thus eliminating the need for additional external inputs.
PHASING OVER. The third type of Exit Strategy approach is ‘phasing over’. In this case, a sponsor transfers program activities to local institutions or communities. During program design and implementation, emphasis is placed on institutional capacity building so that the services provided can continue through local organizations.
There are several considerations when establishing the timeframe for program Exit Strategies. Exit Strategies should be built into the design of programs from the beginning. This will encourage the development of interventions that are sustainable, since an Exit Strategy is a ‘sustainability plan’. For food assistance programs, this may be more challenging than for other kinds of programs, and will require the involvement of communities and local partners from the outset. Establishing an exit timeline that is linked to the program funding cycle, and clearly communicated to the community is essential. Since program implementation will influence Exit Strategy activities, it is important that the exit plan remains flexible with the expectation that some of the exit criteria and benchmarks may need to be modified during the program cycle. Further, implementing exit plans in a gradual, phased manner is recommended, as the staggered graduation of project sites can contribute to sustained outcomes by applying lessons learned from earlier sites to those that come later. Lastly, after phase over or program phase out is complete, continued contact with communities will help to support sustainability of outcomes.
*The C-SAFE Regional Learning Spaces is an Initiative by CARE, World Vision, CRS, ADRA and USAID.