As ironic as it may sound, exit strategy is an important part of entering a business venture. Exit strategy helps define the purpose and direction of your business that whether it will eventually move toward an acquisition, merger, more funding or liquidation. Without an exit strategy your business may lack purpose and direction, not to mention years of struggle.
Here are common exit plans set up by startups:
Keeping Business in Your Family
Traditionally, family businesses have focused on handing down their operations to their children. That’s how many local enterprises have stayed in business for over a century. Typically it’s a matter of including the business in your will to be inherited by family members. Partnerships and issuing shares are methods to consider when deciding who will be taking over your business.
Liquidation of Assets
You can plan a business for a certain amount of time with an exit strategy to sell off assets at a certain point. Many entrepreneurs use this method to move from one business to another by parlaying earnings into new ventures.
Open Market Opportunity
A business can be sold on the open market, similar to selling a home. This strategy of advertising your business for sale to the public allows you to accept or reject buyer offers.
Going Public with an IPO
Putting a company on the stock market through an Initial Public Offering (IPO) usually only favors large operations with valuable assets. But registration fees and complying with complex regulations such as the Sarbanes-Oxley Act may cause you to consider alternatives.
Selling to a Larger Company
Some businesses end up selling to their competitors, supply chain partners or companies with better funding. Strategic mergers and acquisitions usually allow you to make the best possible return on investment. M&As can be facilitated by investment bankers.