December 28, 2022
Strategy
No Comments
Brand Development Strategy importance of exit strategy in business

11 Importance of Successful Exit Strategy in Business

Post Views: 481
(Last Updated On: )

What is the importance of exit strategy in business? Did you know that a viable entrepreneur needs to have a plan for leaving the business? Investors want to fund founders who have the whole package, which includes a lot more than simply an inspiring concept and a clear vision. The founder’s exit strategy is a critical component of the whole package. This article will give insight into the importance of exit strategy in business. Keep reading.

What is an exit strategy?

Two items make up an exit strategy. In its most basic form, it is the roadmap created by an investable entrepreneur that outlines exactly how they will liquidate their investment when they finally sell their company.

Investors are not charitable people. They don’t fund startups only because they desire the success of the entrepreneurs. When an investor’s participation in a business comes to an end, they want to receive the highest return possible, often between 10 and 100 times their original investment.

Exit strategies are occasionally neglected, but that is a serious error for all parties.

From the perspective of an investor, a founder who has a clear plan for how they’re going to create a profitable and scaleable firm from the start, including an outline of their exit strategy, is already well on their way to demonstrating they’re an investable businessperson. Investors want entrepreneurs with a clear exit strategy as well as those who can establish firms that can be sold.

A defined approach is referred to as an exit strategy.

Importance of exit strategy in business

One of the three essentials investors look for in financial predictions is not only having an exit strategy. Your company’s objectives may be defined with the use of an exit plan. Planning an exit strategy is impossible if you don’t understand your goals. As a result, having an exit strategy is a great approach to convince investors that you know exactly what you’re trying to accomplish.

Indeed, entrepreneurs have occasionally moved through with an investment without taking an exit plan into account, but it is a risky approach that is becoming less and less common in these more risk-averse times.

Some founders simply briefly consider their exit plan. We repeatedly observe the same well-known businesses that unoriginal entrepreneurs use as models of possible acquirers in their exit plans (Facebook, Apple, Google).

This just serves to highlight the founders’ lack of planning and thinking, as well as their ignorance of how crucial it is for an investor that a founder have a solid exit strategy.

The creator doesn’t merely want to grow a lifestyle business for the next two or three decades and then sell it as their retirement plan, which is the second advantage of having an exit strategy. It demonstrates that the entrepreneur is committed to creating a high-performing, multimillion-dollar firm with the intention of eventually selling it.

No matter how attractive the founder’s concept may be, traditional startup investors won’t want to invest in a long-long-term retirement plan firm.
Strategies for exiting startups

exit strategy business plan exit strategy plan business exit strategy planning planning your exit strategy planning an exit strategy from a business planning business exit strategy business plan business plan examples creating a business plan a business plan making a business plan strategic business plan financial plan in business plan example the business plan strategic business plan example business strategic planning important of business plan marketing plan for small business company business plan company plan security company business plan write your business plan business plan making example company strategic plan your business plan is a market strategy in business plan security business plan business exit strategy example financial planning business small business plan sample goals in business plan business plan company strategic planning for small business business plan financials reasons for a business plan any business plan business plan for exit strategy business plan example sales strategy example business plan prepare business plan plan your business about your business planning company importance of business plan to managers business plan example for small business business marketing plan example exit plan business company marketing plan making a marketing plan marketing strategy business plan example business plan small business exit strategy in business plan example importance of financial plan in business plan business plan and strategy it company business plan marketing plan in a business plan your business plan management business plan exit strategy business plan sample marketing plan for small business example creating a small business plan business plan of any company creating a business strategy business plans for sale business plan goals examples companies that write business plans business plan sales strategy create your business plan financial planning business plan company business plan examples goals in business plan example marketing plan for business plan example financial strategy business plan example sales business plan examples market strategy example business plan financial plan of a company examples of small business plans strategic plan of a company example marketing plan for it company example of financial strategy in business plan marketing company business plan reasons for creating a business plan sample strategic marketing plan reason for writing a business plan sample of business plan for small business business plan and strategic plan management business plan example business management plan example sales strategy in business plan example create a marketing plan for your business business plan for business company marketing plan example exit plan for business example make your business plan writing a business plan sample business financial plan examples it business plan sample marketing plan making sample strategic business plan business to business marketing plan strategic plan sample for business it business plan examples business plan writing example company exit plan planning example in business importance of having business plan financial plan example for business plan import business plan financial management business plan your business goals having a business plan company plan example business plan in marketing business and strategic planning corporate business planning business marketing plans market plan in business plan sample marketing example in business plan business plan marketing and sales small business marketing plan sample to make a business plan making a small business plan business plan business plan strategic business plan meaning marketing strategy for business plan example marketing strategy plan for small business write your plan company business plan sample business plan financials example exit strategy for a business plan example financial plan for business example marketing strategies for business plan planned business company exit strategy example business strategy examples for small business management of business plan marketing strategy in business plan sample business strategy business plan company management plan about the company business plan small company business plan it company business plan sample marketing plan of a business plan example 10 business plan business financial plan sample exit plan in business plan the business plan is prepared by management example in business plan creating your business business management business plan company financial plan example making business plan example corporate financial plan plan to make a business financial planning business plan sample business plan of any business exit plan of a business sales plan strategy example corporate sales plan management plan for business it business plans creating a strategic marketing plan all business plan do business plan marketing plan of any company company sales plan small business marketing goals example of any business plan marketing plan & strategy working on a business plan create a business plan examples management plan of business plan making a business plan for a small business marketing strategies marketing plan reasons to make a business plan creating a strategic business plan strategic management business plan it company plan a business plan is importance of having a business plan the business plan company importance of making a business plan the market in business plan example and your business help creating a business plan financial plan example in business plan business exit strategy sample exit strategy plan sample business exit plan example creating a marketing plan for small business write about your business the importance of having a business plan importance of marketing plan in business plan example of management plan in business plan management plan example business plan example of making business plan sales business plan sample business goals examples in business plan help making a business plan importance of making business plan management plan example in business plan business goals in business plan creating a business plan for a small business financial plan for security company financial management business plan example companies that do business plans example of making a business plan reasons for making a business plan writing a strategic business plan financial plan for a business example the importance of making a business plan write your business making a strategic plan for business make a business plan examples marketing plan for your business goals of a business plan example reason of business plan exit strategy of a business plan example your marketing plan marketing plan of a company example exit strategy business example a business plan can help a company example of market strategies in business plan example of market strategy business plan plans company management company business plan financial plan small business example marketing and sales plan business plan plan for company company goals business plan creating a sales business plan security company business plan examples sample financial plan for small business business work plan example writing an exit strategy for a business plan an example of a small business plan companies that make business plans establish business plan the business plan example business plan and example example of business plan making importance of creating a business plan reasons to have a business plan reasons for having a business plan goals for business plan examples sample exit strategy for small business make a sample business plan creating a financial plan for a small business business plan making sample marketing plan for business example plan on company goals business plan examples sample of business plan making company and management plan the company in business plan writing a business plan is companies that help with business plans creating an exit plan example of a business plan making guide to creating a business plan the meaning of a business plan examples of business plan making work on your business plan companies that create business plans

Exit plans for startups may be rather diverse. There are several varieties to take into account, including:

  1. Merger and acquisition (M&A).
  2. Buyout of the management and workforce.
  3. giving up control of the business or combining it with another one.
  4. making a succession plan that enables ownership to be transferred to another person.
  5. giving a partner or investor your stake.
  6. Aquihires, when a company is purchased only in order to hire its employees.
  7. selling off assets and shutting down the business.
  8. reducing losses by selling stocks or other securities.
  9. launching an Initial Public Offering (IPO) to let one or more founders and current investors leave the firm without losing any of their
  10. investment
  11. a startup entrepreneur must understand how to value their company appropriately before going public because the regulatory requirements of an IPO might be complicated.

Whatever the exit strategy, it must be a sound plan with the same goal: describing how the founders and investors will depart the company when it is ultimately sold and what the investors will benefit from (or, at the very least, how their risk will be reduced).

The many kinds of exit deals

The majority of startup owners believe they will be able to sell their company for a one-time, lump-sum payment, yet this is highly improbable. The truth is that they’ll probably shut down the company and keep getting payments for another five to 10 years. Alternatively, they could decide to enter into a part-cash, part-share swap agreement, in which case they’ll basically swap their shares for the acquirers and profit from dividend payments and the potential to eventually sell their shares to the acquirer.

Other exit strategies involve the seller “rolling over” part of their shares, which reduces the amount of cash they receive at closing but gives them the chance to make a larger profit overall if the company’s valuation increases, and selling their shares concurrently with the sale of public equities.

The “earn-out,” where a percentage of the purchase price is computed based on how the firm will continue to perform after the sale has been finalized, is another exit deal option. Earn-out refers to the idea that the seller will ultimately be paid more if the performance they are hoping for is realized, but it also implies that the buyer can hold off on paying the seller until it is known whether the performance can be realized.

All of these distinct departure tactics and exit arrangements have their share of advantages and disadvantages, as per the importance of exit strategy in business.

Examples of exit strategies

One of the businesses with which we deal has created a piece of marketing technology that uses quiz marketing to produce high-quality leads.

They might have easily included social media behemoths like Facebook and Google as potential acquirers when deciding on an exit plan. After all, it would make sense given that Facebook and Google are the owners of some of the most valuable marketing technology and intellectual property (IP) in the world, making our client’s technology the ideal fit and simple integration into their product.

However, our client discovered that business book authors were the greatest consumers of their technology since they were already utilizing it to turn their readers into potential customers. Their exit strategy is to sell their company to a big non-fiction publisher who would then be able to provide its technology as a service to their writers, generating a steady additional revenue from the authors while also providing them with a tremendous amount of added value.

exit strategy business exit strategy exit strategy example startup exit strategy exit strategy for investors business exit exit strategy business plan startup exit exit plan for business company exit strategy the exit strategy exit strategy plan exit plans exit plan for investors importance of exit strategy exit strategies for entrepreneurs sell strategy investor exit strategy examples exit investment startup exit strategy example exit plan for startup exit plan startup exit in business exit your business exit strategy of business exit strategy selling business company exit policy business exit strategies examples an exit strategy have an exit strategy exit policy of a company business exit strategy planning planning your exit strategy founder exit strategy planning an exit strategy from a business exit strategy for a startup business planning business exit strategy importance of exit strategy in business investment exit plan

Another of our clients is a PropTech company that has developed a cutting-edge new home-buying process. When it’s time to leave the market, selling their goods to established disruptors in the house purchasing industry like Zoopla, Rightmove, or Purple Bricks would be the natural exit plan.

But after some investigation, our client learned that Amazon is entering the US real estate market by partnering with estate agents to install their Amazon Alexa technology into every “forever home” they advertise, for free!

This is a wise move on Amazon’s part because buyers of “forever homes” often search for a place to live for at least 30 years. If they recently purchased a home with complete Alexa integration, they very surely will continue to purchase an Amazon Prime subscription for the 30+ years they plan to live there.

Final thought

Our client has chosen Amazon as the ideal candidate to buy their company since their technology perfectly complements Amazon’s mission. Their investment proposition has become even more enticing as a result of their ability to convince investors that Amazon is a feasible exit route.

The founders in both of those cases thoughtfully considered their exit strategy. I hope this article on the importance of exit strategy in business will be useful for you in taking the right decision.

More Interesting Artiles

Leave a Reply

Your email address will not be published. Required fields are marked *