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?
Perhaps 15 years if you want to find and match someone you can work with, the person who you want to take over your business will be dealing with your friends and you want to make sure that your client base is in sync with that person or persons.
From the beginning, especially if you're planning on raising capital with equity investors, as they will need to know when they can expect to exit their investment. I would definitely seek the advice of and investment banking and M&A firm. Dave Cochran, Cochran Edwards Capital Partners, Seattle
The exit strategy can greatly vary depending on number of executive partners you have. The % of total shares or input each member puts into the business are also very important aspects to identify before even developing an exit strategy. In the beginning stages of the business, you also have to list all of the stakeholders of your venture on whom your business is dependent. For example, stakeholders other than partners could also be any investors, venture firms or incubator/associate institutions, banks ,etc. that provide any funding or capital resources to get the business up and running. You need to know all your primary and secondary stakeholders (see:http://ctb.ku.edu/en/table-of-contents/participation/encouraging-involvement/identify-stakeholders/main) The short answer: Yes, you need at least two exit strategies, one for how your going distribute funds if you close your business yourself and one in case of bankruptcy. What you put into your venture is what you get, and that will apply to all partners. However, "no" you do not need an exit strategy right away but you do need one as soon as possible to have a legit business plan. Some start-up ventures don't even form an official business plan until 18 to 22 months into their operation, so you have plenty of time to put your chickens in a row, but it's best if you get your plan set-up within that timeframe.
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
Although 95% of the folks here are saying start with an exit strategy, my advice is to focus your start up on building value. You are likely to change your business model several times before you figure out what it will be in the longer term. Once you have a robust business that is producing clear value for customers, then you can have a serious conversation about optimizing it for a buyer. At his point you don't even know what you will be exiting.
As someone who has made a successful exit, I believe the core of your business needs to be defined and stable first. Then you can decide who would benefit most from owning it and start to redesign it to accommodate their specific needs.
And timing is everything. You have to hit the market when businesses are actually selling, and this is a cycle. That means you might need to hang on 5-10 years longer than you think, so make sure it is a business that is solid. If you are positioning it as a business to be sold, to flip, your leverage in a deal is weak because you have to sell it. Better to be a business that is so highly profitable that you are reluctant to sell because your money is working hard there.
The simple answer of course is before you need it.. how do you determine when you need it? Well there are of course many variables. I will provide one simple for instance.. If your business has any partners even just one.. well then you will need an exit strategy before you even begin.. check with the folks at www.score.org one of over 11,000 volunteers will help guide you through the decision process. Best of all the cost is only your time and effort.
Determine possible exit strategies when doing the initial, and subsequent versions, of the business plan.
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!
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.
Have realistic time frames that coincide with your business plan.
I thought of two scenarios. First if you are looking at a strategy to move from your current roll into your venture then it is wise to have this in place.
Secondly, having a back up plan or exit strategy is crucial covering all areas of your business. Nobody opens a business thinking they may falter however it unfortunately happens. If something were to happen to your business, the longer you wait to react the more money you or your investors will lose. As for the consultant, if you know your business you shouldn't need one. You should have you attorney help review your legal options.
Best of success with all your endeavors.
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.
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.
My advice is a bit different. Plan an exit strategy when you know you no longer enjoy the business. Otherwise plan on making it working and thinking only of its success instead of for a way out.
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
Hi Rob, I am in the same situation as you are where I am planning to move from my existing Senior Mgt. job into my own practice. The way I am doing this is to get the experience and business going on the side before I do the leap - not easy but the best way to do it. Jumping straight into a new business might be quite stressful if it is not going to produce profit immediately. Happy to chat with you.
Executive Coach and Professional Facilitator
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.
You will not have a viable exit strategy if the business isn't successful. Exit strategies are a function of your own personal desires. Typically, owners want to get out at one or two points in the natural evolution their businesses. Either when the business begins to mature, or when it becomes obvious that no one else wants to take over and you want to get out.
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.
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.