Crafting an Exit Strategy from Day One

When launching a business, it’s natural to focus on growth, innovation, and the excitement of building something new. Yet, the most successful entrepreneurs know that the smartest way to begin is with the end in mind.

001

Crafting an exit strategy on day one isn’t about planning your departure before you’ve even arrived — it’s about ensuring you control your company’s destiny, maximize its value, and align every decision with your ultimate goals. Just as every building requires clearly marked exits for safety, every business deserves a clear path for transition — so you’re prepared for opportunity, not forced into rushed decisions by circumstance. By thinking about your exit from the outset, you set the stage for strategic growth, attract the right investors, and ensure that when the time comes, you leave on your own terms, with your legacy and financial future intact.

We have found, however, that it’s clear most founders had not been thinking about the day they’d sell the business when launching. Rather, they were focused on the here and now. That’s understandable, but, unfortunately, it’s not optimal.

A CASE STUDY

One of our clients in the technology sector had a very generous benefits package for its employees, in that the founder made the decision to cover 100% of the insurance premiums for all employees (health, life, long-term disability). It was something they were proud of, and the employees were happy to have it. It was partly responsible for long tenure among the team. Even though this decision created organizational commitment among the employees, it contributed to continuance commitment, not affective commitment.

Affective commitment refers to an employee's perceived emotional attachment to their organization. Affective commitment is present when an employee feels like their personal values and priorities are in line with the company's mission and feel at home in the organization. Employees with high affective commitment stay with an organization because they personally care about the organization and want to stay, even if they do not “have to” stay. Founders should lead their organization in ways that create affective commitment.

Whereas continuance commitment is present when employees feel compelled to stay with an organization due to the perceived costs of leaving, such as losing benefits or seniority. It's essentially a fear of what they would lose if they were to leave, rather than a strong emotional attachment or a sense of obligation.

Why does this matter when eventually executing on an exit strategy of any type? Isn’t it a good thing to treat employees well? First, of course it is a good thing to treat employees well. However, this situation was very “out of market,” meaning virtually no other companies paid 100% of employee insurance premiums. As we know, health insurance costs have skyrocketed over the last decade or more, and when that happened the SGA expense associated with employee insurance premiums also skyrocketed and had a significant negative impact on the bottom line. Even so, the founder remained committed to this program.

Fast forward to when prospective acquirers were reviewing the company financials and operating model, every single of the 10+ potential suitors questioned the sustainability of “the benefits situation,” given it was not customary and was excessively costly. All felt they would need to bring the employee benefits package in line with market (same as other employers) to be sustainably profitable, and that doing so would likely cause key employees to leave, damaging the business. Hence all suitors opted out.

While an extreme example, it is a true story. Therefore, our advice is to think about your exit strategy, e.g., whether ultimately selling to another company or financial partner, executing a merger, launching an IPO, or transacting a partial sale, from inception and continue to think about it as the business evolves. Significant decisions made throughout the company’s lifecycle should be made considering their impact on an exit down the road. Evolving a company so that it is sustainable through various market cycles should be a priority.

STAYING THE COURSE WITH THE HELP OF AN M&A ADVISOR

Establishing a relationship with an M&A advisor two to three years in advance of the time you are ready to embark on an exit is one of the most strategic decisions a founder can make. By involving an advisor early, you gain a partner who helps craft a clear, actionable exit strategy tailored to your long-term goals — ensuring you’re always building value with the end in mind. This guidance isn’t just about preparing for a distant sale; it’s about making smarter daily operational and strategic decisions that align with what future buyers will value most. An experienced M&A advisor brings market insight, valuation expertise, and a critical outside perspective, helping you stay focused on growth while avoiding pitfalls that can erode value over time. Ultimately, this relationship enables you to run your business proactively, not reactively, positioning you to maximize your company’s worth and exit on your own terms when the time is right.

ABOUT ENCORE AMC PARTNERS

Encore AMC Partners is a premier M&A advisory and management consulting firm headquartered in Newport Beach, California, distinguished by decades of hands-on experience as both executive operators and investment bankers. Our team’s unique blend of operational leadership and technical transaction expertise enables us to deliver strategic guidance that is both empathetic to founders’ objectives and rigorously focused on value creation.

We serve small to mid-market companies across a range of industries, providing tailored M&A advisory, exit strategy planning, and management consulting services designed to maximize shareholder value and support lasting legacies.

If you're interested in learning more, send us a note.

Back to all insights

Jenifer "Jak" Kihm, PhD

Jenifer “Jak” Kihm has led successful engagements producing sustainable outcomes related to M&A integration, growth acceleration, talent acquisition, due diligence, and process improvement. She has an accomplished record of working with C-suite leaders to help optimize people, process, and systems for global brands.

Jak brings multiple perspectives to the firm having led large-scale M&A integration initiatives including a 22-company rollup, a merger of two $150M equals, and exit for the CapStreet Group of national brand Talent Tree, a Houston-based business services firm.

An industrial psychologist, she plays a vital role in applying and considering client objectives throughout the deal process, including negotiations.