To some, planning an exit strategy sounds negative. Actually, the best reason for an exit strategy is to prepare to optimize a good situation, rather than getting out of a bad one. A good exit strategy allows you to focus on things that make your business more appealing and compelling to a possible buyer.
You chose a business based on your goals. The way the business grows should be aligned with your exit strategy. Don’t wait to think about your exit. Think of it as a succession plan for a successful transition. In other words, consider what you will do and how you will handle things when the time comes for you to sell your current business.
These are the most common exit strategies.
1. Merger & Acquisition (M&A). This normally means you merge with a similar company, or are bought by a larger company. This is a win-win situation when companies have complementary skills and can save resources by combining. For bigger companies, it’s a more efficient and quicker way to grow.
2. Initial Public Offering (IPO). In other words, going public and selling shares in your company. This used to be the preferred mode and the quick way to riches. But since 2000, the IPO rate has declined every year until 2010.
3. Sell to a friendly individual. This is a great way to “cash out” so you can pay investors, pay yourself, take time off and get ready for your next adventure. Peterson Acquisitions can help you find the ideal buyer for your business.
4. The ole Cash Cow method. In a stable, secure marketplace with a business that has a steady revenue stream, you find someone you trust to run your company for you. You use any cash on hand to pay off investors, to develop your next great idea. You retain ownership and enjoy the annuity. But cash cows seem to need constant feeding to stay healthy.
5. Liquidation and close, otherwise known as a write-off. Even lifetime entrepreneurs can decide enough is enough. One often-overlooked exit strategy is simply to shutdown, close the business doors, and liquidate. Many things can make this seem like the most practical option. There may be a natural catastrophe, there may be a major event like 9/11, or the market you counted on could implode. Chart your course up front so you don’t end up going down with the ship.
Once you determine that it is time to exit from your business, you should pull out your ‘plan’ and initiate your strategy. If yours is to sell or merge, think Peterson Acquisitions. We’ll help you with the HOW.