When starting a business, it is essential to consider the end goal. An exit strategy is a plan for how you will leave the company and can have a major impact on business development decisions. The most common types of exit strategies include initial public offerings (IPOs), strategic acquisitions, and management purchases (MBO). The choice of exit plan depends on many factors, such as the control or participation that you want to retain in the business, if you want the company to remain the same after your departure, or if you are willing to accept a change, as long as you are well compensated for it.
Developing an exit strategy before launching the business is ideal, since the choice of the exit plan has a significant influence on business development decisions. An exit plan allows you to get the maximum possible performance and limit any future exposure to what happens to your company later. It is also important to consider that market conditions can affect the attractiveness of a given exit strategy; for example, an initial public offering may not be the best exit strategy during a recession, and a purchase by management may not be attractive to a buyer when interest rates are high. When creating an exit strategy, it is important to consider your personal and business objectives in order to make the best decision for your company at the right time of departure.
You should also decide if you want to sell the company or if you want to transition it to another owner. If you choose to sell, you should look into merger or acquisition options with companies that have similar objectives or are aligned with those of your company. If you choose to transition it, you should look into appointing successors over time and make sure that your family relationships can manage the volatility and stress of owning a business. It is also important to consider business valuation when creating an exit strategy.
There are specialists who can help business owners (and buyers) examine a company's finances to determine its fair value. Additionally, there are transition managers whose role is to help sellers with their exit strategies from the business. In conclusion, there is no one-size-fits-all business exit strategy. The right strategy for you and your business will depend on a number of different factors and may change or develop as you progress through your company's lifecycle.
