This planning should be an integral part of determining the risk associated with the investment, trade or business venture. If cash flow draws down to a point where business operations are no longer sustainable and an external capital infusion is no longer feasible to maintain operations, then a planned termination of operations and a liquidation of all assets are sometimes the best options to limit any further losses. Most venture capitalists usually insist that a carefully planned exit strategy is included in a business plan before committing any capital.
Part of the business planning process is the exit strategy -- bailing out of the business at some point before it dies. The exit strategy is actually a plan to redeem the company from its original investors so they can realize their 10 lbs. An exit strategy is also important to the bank as a plan to retire the debt incurred at start-up.
The desirability of each strategy is dependent on the mix of ownership, original intent, market conditions and company performance. Feed It to the Chipper In the worst case, the company will be broken into pieces and fed to the liquidators as so much chum. This path is dictated by poor financial performance, lack of a viable market for either the company or its products or the impatience of the investors to continue funding a dry hole.
Owner Buyout In many cases, the founder or the employees will have an intense desire to keep their jobs. This scenario assumes a well-performing company that is generating positive cash flow and profits. An agreement is struck with the investors, stockholders or lien holders establishing the value of the company.
The employee group will find a way to finance the amount necessary to buy out the interest of the others, thus taking control of the company away from potentially hostile forces.
Sell the Company This exit strategy is just as it seems. From inception, you build sales and brand value to get the attention of potential suitors. You may have predetermined a level of profit at which you begin to market the company.
You may have done such a good job of building a brand that a competitor or conglomerate will see your company as a good fit to its long-term strategy. This option often results in dismissal of most management in the target company and some consolidation in the ranks.
Go Public The most complex exit strategy is jumping into the morass of regulations managed by the Securities and Exchange Commission. The Sarbanes-Oxley Bill made the process of selling all or part of a company to the public through the issuance of stock a challenging proposition.
The regulations will keep your lawyers happy for years to come. If you plan to use this option, you must start the planning process almost from inception due to the stringent recordkeeping necessary.
References 2 Securities and Exchange Commission: More than 20 years as a banker, 10 years as a small business owner and five years as a business adviser fuel his passion for writing and mentoring others.
An award-winning photographer, he was also a contributing columnist to the "Antelope Valley Press.A business exit strategy is an entrepreneur's strategic plan to sell their ownership in a company to investors or another company.
This article is part of our “Business Planning Guide“—a curated list of our articles that will help you with the planning process! What is a business plan? In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals and details how you plan to achieve.
Business Plan Pro is the fastest, easiest business plan software for small business, startups, and corporate business planning. Features include + sample business plans, SBA-approved format, Excel integration, and more.
If you startup is your dream, why would you want to think about an exit? It's going to be so successful and so much fun that you don't need to think about what comes after. Jul 23, · Exit strategies related to startup funding are quite often misunderstood: The “exit” in exit strategy is for the money, not the startup founders or small business owners.
The company brings in money and the investors get money out/5(28). The exit strategy is actually a plan to redeem the company from its original investors so they can realize their 10 lbs. of flesh for taking the risk in starting or growing your company.