Why do I need to think of an exit strategy?
When you are working hard to get your new start-up off the ground, the last thing you are going to be thinking about is how you might exit your business.
But in actual fact, considering your exit strategy from day one is prudent. After all, you are going to be investing your hard work and cash in this business, so nothing would be worse than simply closing the doors and walking away empty-handed when it comes time to leave.
Thinking about your exit plan will have a big impact on the way you set your business up. For example, good entrepreneurs will think very clearly about ensuring they have robust structures and processes in place, such that their business can exit without them.
Also, your planned exit strategy may help you attract funding. For example, if you plan to float after a certain number of years, you may be more attractive to investors who will know they can sell their investment more easily.
Common exit strategies include:
- A trade sale
- An initial public offering (sharemarket float)
- A merger
- Wind-down of the business