Exit
Strategy: Business
Plan Basics
In order to attract investment dollars for
your business, it's critical to supply an exit plan to investors
so they can get their money back (hopefully with a healthy
return) and exit your company. The exit strategy section of
your business should also outline your long-term plans for
your business.
Begin by asking yourself why you are getting
into business. Do you see yourself running your company twenty
years from now, or are you interested in moving on after a
few years? Are you in it for the big money at the end of the
rainbow, or are you more interested in running a solid and
steadily growing family business?
It's important to think through these issues
and decide what you intend to do with your business before
you can adequately answer the questions, and address the issues,
concerning how your investor will exit your company. The requirements
of each investor will vary in terms of return and exit strategy
they seek. Two examples follow:
Venture Capital
These investors look for a high return and an exit
strategy of approximately 3-7 years. They work almost exclusively
with companies that may go public or can be sold for a significant
profit. However, keep in mind that going public is very rare
and is unattainable for most companies.
Angel Investor
These investors typically are looking for a high return
but are more flexible with the terms of the exit strategy.
Angels are typically less sophisticated than venture capitalists
or institutional investors, and will become involved in your
business because of a personal relationship with you.
Here are some possible exit strategies to
consider:
- Initial Public Offering (a very, very
rare event for most startups)
- Merger/Acquisition
- Buyout by partner in business
- Franchise the business
- Hand down the business to another family
member
For more advice on writing the exit strategy
section of your business plan:
Email
us at BizPlanIt if you have comments or suggestions about
our Virtual Business Plan.
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