An exit strategy is a plan to cash out of the business. Even if you plan on keeping the business running forever under your control it’s still important to have an exit strategy in writing. It can be part of the business plan.
The exit strategy serves to keep the business ready in case an opportunity comes to be bought out by a larger company. Many small companies start with the vision of getting either bought out or doing an IPO. With that kind of solid exit strategy goal the business founders are more likely to realize the wealth they’ve been working to create in a business. However, it’s important to have a documented exit strategy for any business.
When you reach the point with your business that it becomes moderately successful, or has some unique products and intellectual property it’s only a matter of time before other companies will take notice. At some point it’s likely that a larger company will come knocking on your door and start talking about an acquisition. If you find yourself unprepared for such a situation when it arises then you’ll likely be overwhelmed with the dollar values they’re talking about. It will be tempting to take the money and run.
A good exit strategy requires that the business has a way to evaluate the value of the company. Know the value of your business, and you’ll be ready for that surprise offer.
Don’t be caught off guard. Have an exit strategy in place for your business.
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