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Exit strategy for your business plan

Exit Strategy for your business plan

For the best insights on Business Plan Development, finding good investors click here


Exit strategy for your business plan

Now that you have thought your business plan out and are itching to get started it is the perfect time to verify your business model against realistic exit strategy. Yes, you should think about the happy end before you start your race. And that is especially true if you plan attracting outside investors to you project. The exit strategy presents the way investors pull out their investment from your business at the end of the day. And it is not the payback period they are interested in: investors are only willing to risk their monies if they do earn profits (and the higher the multiplier is the better). In most cases the small paragraph about exit strategy in your business plan attracts more eyeballs then your sales projections. Moreover, your entire business model depends on how you plan to cash out. There are 4 major types of business exit strategy:


Exit strategy for your business plan

1. IPO This is definitely the sexiest way to have your exit party, but only a few out of millions of companies actually strike that high. IPO’s do attract a lot of media attention and that is probably how you started to consider this option. But it takes years to build a company, which can go public and then years (and millions of dollars) to actually prepare it to Initial Public Offering (IPO). You’ll have to restructure your accounting procedures, reorganize your management system (which sometimes requires hiring professional top managers instead of you, the founder) and make a fabulous IPO road show, to convince analysts and stock investors that your company is worth their money. And even then you can still find yourself in the situation when your share in the company has been diluted by the joint efforts of your fellow investors. IPO is more like the highest target for your company than a realistic business plan exit strategy. So make sure you provide additional options for your investors.


Exit strategy for your business plan

2. Business Acquisition If you plan selling a business to cash out, you should focus on building a transparent and sustainable company. To be successfully acquired a company should be of optimal size (not too big, not too small), live comfortably in its market niche, have a well-trained team of managers and specialists and established relationships with key suppliers. But what is usually in the heart of most acquisitions is the product (or the technology). So in your business plan developing a winning product concept, taking over some specific market or creating a technology that a larger company can benefit from should be particularly stressed. And also prove that you’ll be able to sell your company when the time strikes: list similar acquisitions that have recently been conducted and/or the list of potential buyers, which could be interested in your company.


Exit strategy for your business plan

3. Business Merger Usually merger and acquisition go hand in hand: if the business you are to build can complement existing large companies it is an acquisition; if it can make a perfect match with a company equal in size, it is a merger. So if you plan merging with a specific company, make sure that your entire business plan follows the logic of such exit strategy. Outlining the companies potentially interested in merger is also important to make this exit strategy look feasible.

4. Business Buyout Sometimes

entrepreneurs

do

build

companies

for

themselves. So if you are the case, you might feel emotionally attached to your business concept or you plan devoting your life to building a great company from scratch. And though you might need some additional investment to launch or lift up the business, you’d like to regain control over your company afterwards.


Exit strategy for your business plan

So make your exit strategy clearly stated in your business plan and provide estimations of when will you buyout the share from your investors and at which price (interest rate). Normally the interest rate depends on the risk level: the higher the risks of loss the higher the interest rates are. You should also outline the level of control investors will get while participating in your project (if any) and the opportunity for them to preserve minor shares in your business after the buyout. So the general rule with business plan exit strategies is that they should repeat the logic of your entire business model, be feasible and realistic.

For the best insights on Business Plan Development, finding good investors click here


Exit strategy for your business plan