At what point should I start thinking through an exit strategy?
I'm thinking through the business plan for my next venture and I'm not sure what the ideal exit strategy should be. Should I work with a consultant and decide ASAP or can I afford to wait and see how the business pans out first?
Rob, seems Im a little late to the party, obvious from the comments that consensus is create an exit strategy NOW...As a serial entrepreneur, Ive built out and sold 9 business groups. In ever case my initial business plan included the exit strategy so I knew what I was building and whn I got their (or when I was getting off track) If you plan to exit rather than contiue to own and manage your business, its very important to continue to ask yourself, what would I think if I were buying this business...Those owners that wait to ask that question until they are ready to sell, often are too late to make sure the buyers perspective will be a posiyive one
One of the first questions I ask of prospective and new clients is – do you have an exit strategy? The detail that the strategy must have differs by how new the business is and what motives the business owner but, I encourage the discussion as early as possible. Do you want to sell to a larger company, do you want a family member to take over, would you like to sell to current management? All these decisions will impact how you prepare for the inevitable exit. Interestingly, how you build the business into an asset that has value are some of the same processes for creating an exit. Do you have a management that can run the business without you? Have you created a business or are you trying to sell your job? Are you able to rely on a broad base of customers selling a range of products or services? Your focus on answering these questions will direct how you choose to build the business
Investors love exit strategies, yet they are not necessarily essential at this stage of your business. If the business doesn't pan out, no exit strategy will help.
If the business does succeed, you'll likely have offers. Even though an exit strategy helps, it can also hinder, getting you focused more on that event than making hte business successful.
Draft up a few possible exit strategies and move forward, if you're going to get consulting help get it for growing your business, not for an exit strategy.
Exits aren't rocket science; you'll get acquired, go IPO, or simply continue. While it does help to know who you want to buy you, they will find you if you succeed.
Investors will want to know that there is an exit strategy, but you should be focusing on developing a sustainable business. I usually just put down the standard strategies which include IPO or acquisition and list a few possible candidates for the acquisition. That makes the investors happy, and you can put more time into the marketing plan, implementation plan, and revenue model.
My smug answer is yesterday. Some exit plans can take years to execute which is fine if you want to take years to execute them. The liquidity you create in your business is part of this plan. If you think you will get a private equity money to take you over, you need to have prepared your management strategy (as you would with an ESOP) in place when you talk to them.
Depends in degree. However, you should always start with the end in mind. In other words, think about your exit as you start the business.
If you intend to seek investor funds, this is an absolute requirement as investors want to know your strategy and timing as it relates to them seeing a future return on their investment.
If no need for investors, it is still wise to know generally, as this impacts your growth strategies along the way.
As a consultant, I enjoy working with clients at all stages, but you should first think through your objectives on your own based on your unique combination of business and personal goals.
Your ideal exit strategy depends on why and when you want to exit. The best strategy will create a few options that you can choose based on how the business pans out.
A consultant can help you get the best of both worlds. Shoot me a message if you'd like to discuss in detail--I don't specialize in exit strategies but might be able to offer you some more free guidance.
Here's my profile: http://www.mosaichub.com/member/p/sean-power
Feel free to get in touch.
They say on "Mad Men" on AMC that the first day you get a client is the first day you start losing that client.
Don't get too big but don't stay too small. All the best.
You may chose to think about an exit strategy along with the barriers of entry that may arise as you develop your idea and get ready to go to market. Each phase of growth or lack of growth; how well the market responds to your idea; if you hire the appropriate Human Capital; the implementation of your processes, and various other barriers that may pop up. Exit strategies are needed for many reasons. Be prepared.
The short answer is right away. Start with the end in mind.
As a Business Transition Expert, I can tell you that only those business owners who have planned their exits with the help of a trained Success Team will pull off the exit they want at a price they like.
Over the next 15 years, we are entering a buyers market. With all the baby boomer owners looking to exit, only the best and most prepared will achieve the exit price they seek.
If you want to discuss this, let me know.
Partner, B2B CFO
Hello Rob. It's advisable to have an exit strategy from the start but have some clear milestones or better said, triggers for it. An exit strategy or triggers for exit identified at the start mean you can actually build the business and run it with this on mind. It will actually impact on your more strategic decisions.
Now! Exit Strategy is the basis of all business plans; for you and your investors. Predetermine several options for exit which could include
1-Selling out completely or partially
2-Acquiring a complimentary firm and allowing them to assume operational control (hence exit)
3-Stepping aside for a manager to assume more day to day control when the business exceeds your ability. Often necessary with entrepreneurs or business development folks, or
4- IPO, the holy grail of Exit Strategy. Not as glamorous as you may think but very exciting.
Hope this helps. Good luck with your venture. Let me know how it is going.
What do you really want to do? Have u answered this question? Have you created a mind mapping? What do you have NOW "in your hand" to start a new venture? What other helps do you have? What do you need to start it? If u had the money to start it...what would you do? What do you think may occur taking an ASAP decision?
If you have the answer to these questions...you'll have the great answer of your post.
You have alot of great advice already . I would put a formal exit strategy together with the idea that you are going to reach that goal. But remember its great to keep equity and continue making money through the growth and acquisition of your new business. Don't lose sleep over the ideal exit startegy. Burn all your bridges so you're forced to win!
I won't work with a client that can't come up with an answer or isn't willing to think about this right away. Like has been said many times here, at the beginning!!! Depending on the strategy that you select could completely change the manner in which you build the business. Done right you can exit your business 3 - 5 years after you start. Wait until your ready to exit and guess what? You have 3 - 5 years to prepare your business and that doesn't mean you'll get what you want for it either! - Dino
Dear Rob, you start as soon as you are starting up the business that is during consultation to find the one most appropriate to your business.
It might seem odd to think about getting out of your business when you are just getting it started, but planning an exit strategy at the same time as your business plan is optimal. It gives you a chance to think through your options in terms of financial goals and who you might choose to groom to take over for you. If you didn't plan a strategy at the outset of your business, then think it through as soon as possible. When you are having issues in your business or feel ready to try a new venture, you may find that because of lack of planning, you are stuck where you are.
Good Evening Mr. McLaughlin. To answer your question as to whether or not you should have an exit strategy right now with your new business, I believe that you should. Part of your Business plan should include an exit strategy. You can seek the advice of a consultant and decide what the best strategy would be for you along with executing the rest of your business plan. This will allow you to understand where you are, where you want to go and where you want to be in the future should you decide to do something different. Hope this helps!!!
Exit planning should begin during your business planning stage. The form of corporate entity and whether you decide to protect intellectual property as trade secrets versus patenting, copyrighting, etc., and what parts of the world you will obtain patent protection, will have a large impact on your ability to effect an exit with a party of your choosing. Also, obtaining investment from a strategic (industry) venture investor will afford far gentler terms and less dilution in exchange for a "first look" provision on your proposed sale down the road. I have seen companies formed to develop a product line with a particular acquiror in mind. One must always be prepared to pivot if circumstances dictate and your exit target may be acquired or change its business model (sell of a line related to your product). One cam never start too early in planning an exit if that is your goal.
When you start the company, glib I know but the earlier the better as it will tend to shape the other critical decisions that need to be made. Good ideas help but market share (or potential) and earning multiples are still the key attractions for investors and buyers.
You should know your ENTRY and EXIT strategies before even start the venture. Why?
Perhaps the best answer comes from the behavioural finance. When people deal with uncertain and risky matters (like any business), they start behave IRRARIONALLY. I am not going to enter into details, but there are A LOT of different irrational behavioural patterns that are emerging under these circumstances. That is to say, that BEFORE you get involved into the venture, you think more RATIONALLY than AFTER you get involved. This inevitably means that your decisions BEFORE entering are much more valuable than AFTER entering.
This is a paramount rule for any trader - to know his/her enter and exit levels BEFORE he/she got into the trade.