In this week's blog we are going to talk about your Exit Strategy.
- Why are you getting into business?
- Do you see yourself running the company twenty years from now, or are you interested in moving on after a few years?
- Is your goal to make a lot of money?
- Or Running a Solid and Steadily Growing Family Business?
It's important to think this through and decide what you intend to do with your business so you can share this information with investors. The requirement of each investor will vary in terms of return and exit strategy.
Why have an exit strategy?
- You will begin with the end in mind.
- You’ll know when to get out.
- Makes the business more fulfilling now.
- You’ll stay sharp on the competition and take action faster.
- It attracts business dollars.
What are the types of exit strategies and their ramifications?
- Lifestyle - Enjoying the profits that fund your lifestyle
- No investor
- No growth demands except to stay in business
- Inheritance Bequest - Pass the company to your heirs
- Taxes and tax planning
- No Equity investor
- Sell to a Larger Corporation - You need to pick the resources to build that would be of interest to the candidate buyer i.e, Employees, Customers, Market, Manufacturing.
- Focus on resources to build
- Initial Public Offering (IPO) - Sell to the public
- Aggressively build revenue and growth
- Loss of personal control
- Shut Down - Dissolve the Comany
- No investor
- Tax implications
- No equity
- Sell assets
Here are the steps to building your exit plan:
- Review the assets currently in your business. What's the business worth?
- Decide what the business would be worth if you accomplish your planned goals.
- Target the key steps to focus on and add value. What would a buyer value most?
- Plan how to create these assets. Break up the job into pieces or tasks that can get done.
- Identify potential investors or buyers long before you'd ever think of selling.
- Assuming you own a business with the potential to go public.
- Failing to explain how your investor will specifically recoup their investment and a significant return
- Failing to take your personal goals into account when planning your exit strategy
- Not having an exit strategy.