Having an exit strategy from the beginning stages of
business conception gives a sense of comfort and confidence moving forward to
everyone involved in the business plan.
Even exit plans that address an unsuccessful result offer support; they
inspire risk and poise by giving failure a face. When the outlook of failure can be identified,
it no longer is equated to the end of the world; it becomes a surmountable
reality.
However, exit plans do not all revolve around the failure of
a business. They also address
fulfillments to obligations and shareholders.
The eventual harvest of profits is the goal of both the entrepreneur and
investor, so making the terms of well-defined is important to create a
goal-oriented business strategy.
Here are some exit plans that address this idea of
Harvesting:
Strategic Sale – Strategic sales are generally labeled
mergers and acquisitions. In this
scenario, an industry player can buy or merge the business with a similar
company. These sales generally create a
win-win scenario for all parties involved.
Initial Public Offering – An initial public offering or IPO
are the preferred method for venture capitalists and other savvy investors, especially
when markets are bullish and the company is need of cash. Having a publicly traded company is an easy
route to raising additional capital.
Also, investors and stakeholders alike stand to gain a significant
return from the sale of holdings after the IPO has completed.
Financial Sale – In this transaction, buyers purchase the
business based on current value and future cash-flow expectations, making the
return of investment somewhat predictable.
It’s a very clean way to cash out and pay investors. Do your business and its stakeholder a
service by ensuring the sale goes to a competent buyer.
References:
Amis, A. & Stevenson, H. (2001). Winning Angels: The 7
Fundamentals of Early Stage Investing. Great Britain: Pearson Education.
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ReplyDeleteSean, I like how you viewed harvesting as "giving failure a face" and fulfillment of obligations. Just acknowledging and accepting the end either forced or planned is a huge step for business owners. Exit Strategies carry emotional and financial loss and gain; from accomplishment in fulfilling a dream to freedom of retirement and passing the business along to employee(s) or family member or closing the doors forever to getting out before you are put out. Planning succession is always better than force succession. So an entrepreneur should think about planning for out while jumping in.
ReplyDeleteSean,
ReplyDeleteI really enjoyed your post - you really encourage the idea of an entrepreneur being confident and stepping out of the box with faith - because one never know what they can accomplish until they have tried. However, before we put into motions - we must be prepared for it to be success or possibly - failure. But, failure as you mentioned is not the end of the world- its steps that if one make a few changes - can lead to success.
I agree that having a exit plan in the beginning creates a sense of comfort for both the entrepreneur and investor. I enjoyed reading your post.
ReplyDelete