Contingency Plans in Businesses: A Brief and Concise Overview

Avengers: End Game might be one of the most talked about films at present, but almost a decade back, Marvel Entertainment, the studio responsible for producing Marvel films, was close to bankruptcy.

Then came Disney which bought Marvel Entertainment and saved it from who knows what could happen to people’s beloved superheroes. This was back in 2009 when the 4 Billion USD purchase sent people doubting whether or not the purchase was worth it.

But, fast forward to the present, Marvel was able to retain its glory, and Disney was able to gain more money. It is a win-win situation partly because Marvel was able to have an effective business exit strategy. Selling a business in Utah as part of an exit strategy is important, not to mention, effective.

But for one to fully enjoy its benefits, it pays to understand the role of having an exit strategy in place as early as possible.

What is an exit strategy?

Unfortunately, there is no clear-cut way to exit a business, nor does one know exactly when to do so. Therefore, an exit strategy something that you have in the form of a contingency plan.

Having one before you actually start a business is often ideal as it allows you to minimize the losses, or even enjoy the gains from your business before letting go of it partially, or permanently.

Create an effective contingency plan.

A contingency plan is needed. But no one can tell you how to effectively have one in place. This is because every business is different, and a lot of factors has to be considered when making one.

Business A can reduce more losses when it declares bankruptcy or is shut down while Business B will be able to reduce its losses if it chooses to enter into a merger with another company. Aside from considering one’s gains and losses, one’s participation in the company should also be considered.

Selling your business to another does not mean that you will totally let go of your rights, although it is possible to do so. Having a say, or a share is something that most business owners continue to have even though their company is under new leadership.

What are the ways to minimize business exit losses?

business planning

Understanding the value of having a contingency plan is not enough. One should also know the different ways to execute them. The most common one is closing down.

Depending on the factors involved in your business, sometimes, simply shutting down before the business plunges down to nothing is considered a smart move. Others, however, would benefit more from mergers and acquisitions as this allows them to see their companies still in operation despite being under different control.

For bigger and more established companies, opting for an Initial Public Offering (IPO) is an option that allows them to enjoy more stability and even gains in the long run.

No one would like to think that their business is failing, but having a plan in place when such unfortunate events happen can help you be prepared in facing the giant when it chooses to wake up.