Why PR Firms Need an Exit Strategy From Day One

We advise our clients to build their PR firms “as if” they plan to sell it. That’s because this mindset not only prepares our clients for the last day they own their company, our experience shows that it maximizes profitability, builds value and intelligently guides business decisions. An integral part of this approach is the exit strategy.

Here are just some of the reasons why exit strategies are invaluable for business success and will maximize the monetization of your sweat equity.

Clearly defined success: A solidly constructed exit strategy encourages owners to focus on goals and benchmarks and makes defining success more quantifiable. Without an exit plan, it’s easy for people to get hyper-focused on day-to-day responsibilities rather than thinking long-term. Planning ahead gives you more clarity over your performance and will help you see whether you’re on track with your goals or need to make any changes to meet your expectations.

Prepares for unexpected events: Think of an exit strategy as the playbook you can follow when unanticipated events occur. For example, a sudden death, divorce, or health issue may warrant an early decision to sell and departure from your firm. With an exit plan in place business owners can move quickly to preserve their company’s value and act strategically instead of reacting to a situation in an inadvisable, costly manner.

Financial protection: Exit plans aren’t carved in stone, so contingencies are built into the process based on current goals and accurate valuation of the company. If the business is profitable, an exit strategy allows the owner to partially or completely separate from the business while still making a profit. If the business is struggling, implementing steps outlined in the exit plan provides a plan to limit losses or take corrective action steps.

Know your firm’s value: We understand that there’s no boilerplate formula for valuing a PR firm because every valuation is different. We conduct a thorough evaluation of a firm’s assets, gauge market conditions and review financial documents. PR is a business in which financial performance needs to consider intangibles such as relationships with clients, depth of second-tier management, and market conditions. Once an accurate value is calculated, the details of the exit strategy can be built with that number as a foundation for goal setting and eventual sale in mind. Our “Waterfall” analysis will show what you will “Net” from the transaction.

What’s the best end game?: The purpose of the exit strategy is to put business owners in the most favorable financial position once they’ve separated or changed their status with the firm. But one of the most important aspects of the exit strategy is deciding how their involvement with the business ends. Will the firm seek a merger or acquisition, or an outside investor to fuel the growth of the firm with monetizing being tabled for a few years? All of these options, and many more, come with pros and cons that impact the flexibility of your stake in a firm or freedom to simply walk away. The decision hinges on the owner’s goals and then exploring market conditions and other factors to determine the most viable path to take and the timing to execute that plan.