If you are standing outside a business - and looking in - your judgements about a whole set of issues and topics will probably be markedly different from the judgements of those working inside the business.  Take an apparently simple question, such as "Is this a good business?"

Have a look at bdrc continental where you can download either the full report or just the management summary - which is well worth a read.  There is much here that the directors or owners of an SME will find interesting - whether it has to do with success rates applying for overdraft renewals or the percentage of SMEs who have decided to never seek external finance - a group that is both significant and growing.  It also looks at owners' willingness to personally finance their business.  There is lots more and it is all good stuff.

Even if you only use the report as a yardstick by which to benchmark your own company's attitudes to finance - and success rates when it comes to applying for finance - you should derive considerable value from the exercise.  The report highlights that there is a significant spread in terms of adoption and success across this whole area.  

In our view this underscores the need for SMEs who have little personal experience in this area to seek specialist help when they are looking for external finance.  CMC are in the process of preparing a white paper for business owners "thinking about raising finance for their business" which will be available from our downloads section shortly. 

Sometimes the new venture is a completely random departure - there is no rational linkage between the exisiting business and the new opportunity.  It is the product of an excess of enthusiasm or a lack of critical judgement - or more likely a fatal combination of both.  Sometimes, the step is so small as to appear almost inconsequential - an obvious, logical progression.  An example might be moving from selling a product to renting the same product instead, or selling what appears to be an obviously complementary product. Both are fraught with peril - a step into completely uncharted waters.

This is one of those situations when asking someone in the team to play "devil's advocate" - is not just desirable but an absolute necessity.  All the assumptions need to be thought through, laid out and then challenged and tested.  The evidence, if there is any, needs to be reviewed and re-evaluated - is the analysis accurate, is there an alternative explanation for the observed behaviour, how significant and/or representative was the sample, do we have the right skills and the right people.  Most importantly, do we have enough cash to fund this new venture?

The danger is greatest, when the person championing business diversification is the boss.  MDs take note.  This is where you can demonstrate genuine leadership.  Develop a rigorous process to test and challenge new business ideas.  Then, make it absolutely clear that your own ideas will be subjected to the same level of scrutiny as anyone else's.  

It is far better to trash an idea in the board room than let it escape into the market - where the financial cost will no doubt be far higher but the damage to reputation may be incalculable.

If, we suggest, you know where you are going four things become a great deal easier:

• you will be in a position to make sensible decisions about the route you should take
• you can avoid obstacles or detours that would otherwise disrupt your journey and delay your arrival
• you will have a clear idea of how much further you have to travel
• you have a real chance of recognising when you have arrived

And finally, to stick with the model for one last observation, every journey has a starting point.  Our approach to helping owners map their future journey starts with exploring and agreeing the owners goals and objectives and achieving a clear understanding of the situation in which the business currently finds itself.  Only by understanding the starting point and the final destination as defined by your personal objectives can you set down the strategy and the plan which will deliver the outcomes you require. 

QED

Developing an exit strategy is not rocket science - just a review of a fairly limited set of options to see which one most suits your situation and your aspirations. 

Sometimes the step is one the owner can make without help

By definition then, the exit strategy describes a future state of the business in which you no longer play any active part.  In the majority of SME businesses this will be an enormous change

Auditing the top level strategy of the business is at the heart of assessing its health.