How to Choose an Exit Strategy
When deciding on an exit plan for your business, you must consider some essential factors. Some tips can help you choose the best exit strategy suitable for you. If you want to have a successful exit plan, then you must do proper planning. The earlier that you start with your process, the more rewarding your actual exit will be. The truth is that most businesses start this process even without realizing it. There are different steps involved, including creating an independent board, exploring your business growth via internal operations, improve your financial controls and reporting systems. You also have to fine-tune your company strategy. These are some of the areas you need to address when building a successful company. With time some entrepreneurs start to think of an exit strategy in future. This process takes time. Hence you should start early.
Below are some of the essential factors to consider when choosing your exit strategy for your type of business. Whether a management buyout will work best for you is another factor to consider. The IPO or acquisition is ideal for you.
Below are the essential factors to consider when deciding on an exit plan. There are different reasons why people start businesses. This can also influence their exit strategy. In the beginning, some people want to change the world. Hence they start the company, yet others may do so because they don’t want to work for others. Different aspects may determine your exit strategy. At first, when starting a company, as a founder, you own the entire business. However, when you involve equity individuals or investors, they will take a portion of your business with time. Therefore these people will have a say in your potential exit strategy.
When deciding on an ideal exit plan, one of the significant aspects to consider is your future role in the company. In most cases, this depends on whether you want to continue managing the business. For example, suppose it’s a managed buyout or an IPO. You and the entire team continue playing your usual roles just like before after the transaction. However, if you choose a strategic acquisition, the buyer will be the business owner and the entire team. Therefore a strategic exit strategy is the best solution for most businesses stressed about successional planning matters. However, a management or IPI strategy works better for those teams that wish to stay in charge.
You must examine your liquidity needs. Most companies view the exit strategy as an opportunity to gain the benefits of their tedious and hard work; hence they increase their personal liquidity; however, it is essential to remember that exit strategies are quite different. For example, a strategic acquisition can generate direct cash payment, which increases the business owner’s liquidity. Sometimes, you cannot sell your shares in an IPO, depending on the share lock-up agreement. Only after a particular period. In a management buyout, the original company owners receive the liquidity over time. Therefore, you need to make this decision carefully to take up a plan that will benefit you the most.
How to Choose an Exit Strategy