Business Exit Strategy and Business Exit Planning
A business exit strategy is the entrepreneur’s strategic plan to sell ownership to the investors in the same or any other company. An exit strategy gives an entrepreneur an approach to decrease or liquidate his stake in a business. It can also be used by an investor to get the cash out of an investment.
If an entrepreneur thinks about the word “business startup,” the questions which come to their mind are about initial investment, a proper channel to go through it, and strategies for growth. But do these decisions affect the road? A real entrepreneur thinks about a plan which would lead to earning a fortune in the future. He also works on a strategy that would make a way to get the money out.
Understanding the Business Exit Strategy
An ideal way is to come up with an exit strategy in the beginning as it can affect business development decisions. The exit strategy to choose depends on the amount of share an entrepreneur wants to retain after leaving. Does he want the process to run in the same way as before or change as the business moves forward? The share of ownership helps the entrepreneur earn his fair amount of money.
Types of Business Exit Strategies
To plan a good startup is an initial goal. An entrepreneur might want to leave in case of a loss since success is not always a guaranteed result. The following strategies will help to make things easier for you at that time.
Merger and Acquisitions
This involves either merging with a similar or being purchased by a large-scale company. If the merger company uses the same skills to operate, this can help to save your resources. For larger companies, it becomes easier to generate revenue effectively.
Initial Public Offering (IPO)
It is a process of offering shares of a private company to the public by issuing new stocks. This approach was followed until the IPOs rate started declining every year from 2000-2010. Shareholders are now more demanding, and liabilities issues have also increased.
Sell to a friendly individual
Sometimes, an entrepreneur might only be good at coming up with an idea but not at executing the plan. In this case, this strategy helps you to sell it off to a person who has better skills in operating the business. The owner can take the cash out to pay off the investors and take some time on himself.
Make it your cash cow
You can always come with another startup idea while still operating a successful business in a stable market. This option enables you to find somebody you trust to run the existing business for you. Meanwhile, you utilize the rest of the money to build up your next extraordinary thought. You may still retain your ownership in the previous business while working on another one.
Liquidation and closing
An entrepreneur can spend half of his life working for a company and still decide not to carry it on. This strategy is to close and liquidate your assets for a complete shutdown only.
Planning the Business Exit Strategy
Few essential steps for planning an effective business exit strategy are explained below
- Prepare the accounts: The first step is to step up both personal and professional financial records.
- Consider the options: After going through financial accounts, the next is to choose the best option according to the records.
- Approach the investors: The third step is to contact the investors and stakeholders. This is to plan a strategy that would help to repay them once you exit the business.
- Choose the next one: This step involves choosing the person whom you can think can deliver the same values and work on the responsibilities.
- Inform the employees: A meeting should be held with the employees when the business exit strategy is ready. This is to let them know about it and answer their queries.
- Tell the customers: The last step is to inform the customers who have been using your services. They should be informed about the new leader or another alternative in case of a complete shutdown.
Some people find planning an exit strategy more negative or demotivating to start their business. The main reason to come up with a plan is to help you grow. It is for improving in a better situation rather than making you come out of a bad one. The focus should be to make your startup more appealing and enthralling for the buyers whom you wish to target.
The type of business you choose always depends on the goals you set for yourself. Along with that, the business’s growth should go along with the exit strategy. A person shouldn’t wait for a trouble situation to plan an exit. The smart way is to consider your plan as a successful transition.
We, at Oak Business Consultant, are specialized in providing consultation on these matters. Therefore, you can visit our website Oak Business Consultant to consult with us for free before reaching out to the investors.