Planning Your Exit Strategy – A Guide for Investors AND Entrepreneurs

People start companies for different reasons, and whatever those reasons are will have a definite influence on their exit strategy. Some people want to revolutionize the way the world does things, while others simply don’t want to work for anyone else, so they start a company and are happy to stay small.  The right exit strategy is very dependent on the feelings and objectives of the people who founded the company in the first place.

It will also influence how you operate your company. For example, if your ultimate aim is to list on the stock market, you should follow certain accounting regulations right from the beginning. And if you want the business to stay in the family for generations, you probably should start bringing your children to work.

Taking Investors into Account

However, your exit strategy may not be wholly your decision. If your business has taken on investment from equity investors, venture capitalists or angel investors, you will more than likely have relinquished a share of your business to those investors. This almost always means that you’ve automatically given them a say in what your exit strategy should be.

Angels and venture capitalists usually look to get in and out of a business within five years or less – with a good return on their initial investment. They will want to know from the beginning how you plan to help them achieve that.

Successful People are Good at Plan B

It’s important to remember that no matter what your exit strategy is at the beginning, you need to have a certain degree of flexibility, and should be prepared to tailor your strategy to the market conditions at the time. Demand for your company’s products or services, and investors’ appetite for IPOs and acquisitions can both have an impact on your exit strategy.

Get advice from industry professionals about trends in the marketplace. The IPO market, for example, has swung back and forth from the dot-com boom in the late 1990s to the most recent economic downturn. The JOBS Act is helping to improve the situation, but having more than one possible strategy up your sleeve will ensure you are prepared, no matter what the market is doing.

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