Exit strategy for your business planExit Strategy For the best insights on Business Planfor your Development, finding good investors clickbusiness plan here
Exit strategy for your business planNow that you have thought your business plan out andare itching to get started it is the perfect time to verifyyour business model against realistic exit strategy. Yes,you should think about the happy end before you startyour race. And that is especially true if you plan attractingoutside investors to you project. The exit strategypresents the way investors pull out their investment fromyour business at the end of the day. And it is not thepayback period they are interested in: investors are onlywilling to risk their monies if they do earn profits (and thehigher the multiplier is the better). In most cases thesmall paragraph about exit strategy in your business planattracts more eyeballs then your sales projections.Moreover, your entire business model depends on howyou plan to cash out.There are 4 major types of business exit strategy:
Exit strategy for your business plan1. IPOThis is definitely the sexiest way to have your exit party,but only a few out of millions of companies actually strikethat high. IPO’s do attract a lot of media attention andthat is probably how you started to consider this option.But it takes years to build a company, which can go publicand then years (and millions of dollars) to actually prepareit to Initial Public Offering (IPO). You’ll have to restructureyour accounting procedures, reorganize your managementsystem (which sometimes requires hiring professional topmanagers instead of you, the founder) and make afabulous IPO road show, to convince analysts and stockinvestors that your company is worth their money. Andeven then you can still find yourself in the situation whenyour share in the company has been diluted by the jointefforts of your fellow investors.IPO is more like the highest target for your company thana realistic business plan exit strategy. So make sure youprovide additional options for your investors.
Exit strategy for your business plan2. Business AcquisitionIf you plan selling a business to cash out, you shouldfocus on building a transparent and sustainable company.To be successfully acquired a company should be ofoptimal size (not too big, not too small), live comfortablyin its market niche, have a well-trained team of managersand specialists and established relationships with keysuppliers. But what is usually in the heart of mostacquisitions is the product (or the technology). So in yourbusiness plan developing a winning product concept,taking over some specific market or creating a technologythat a larger company can benefit from should beparticularly stressed.And also prove that you’ll be able to sell your companywhen the time strikes: list similar acquisitions that haverecently been conducted and/or the list of potentialbuyers, which could be interested in your company.
Exit strategy for your business plan3. Business MergerUsually merger and acquisition go hand in hand: if thebusiness you are to build can complement existing largecompanies it is an acquisition; if it can make a perfectmatch with a company equal in size, it is a merger.So if you plan merging with a specific company, makesure that your entire business plan follows the logic ofsuch exit strategy. Outlining the companies potentiallyinterested in merger is also important to make this exitstrategy look feasible.4. Business BuyoutSometimes entrepreneurs do build companies forthemselves. So if you are the case, you might feelemotionally attached to your business concept or you plandevoting your life to building a great company fromscratch. And though you might need some additionalinvestment to launch or lift up the business, you’d like toregain control over your company afterwards.
Exit strategy for your business planSo make your exit strategy clearly stated in your businessplan and provide estimations of when will you buyout theshare from your investors and at which price (interestrate). Normally the interest rate depends on the risk level:the higher the risks of loss the higher the interest ratesare. You should also outline the level of control investorswill get while participating in your project (if any) and theopportunity for them to preserve minor shares in yourbusiness after the buyout.So the general rule with business plan exit strategies isthat they should repeat the logic of your entire businessmodel, be feasible and realistic.For the best insights on Business Plan Development,finding good investors click here