Exit Strategy For Business Plan

A strategic acquisition will often generate an immediate cash payment, thereby increasing owner liquidity.Sometimes, however, the final price is not determined until the end of an earn-out period, which can last several years.

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However, not all exit strategies work equally well in this respect.

In an IPO, for instance, your shares likely will be subject to a share lock-up agreement, which means you will not be able to sell your shares -- even after the IPO -- for a period of time, typically six months.

In fact, you already may have started planning without even realizing it.

Many of the steps involved -- including creating an independent board, upgrading financial reporting systems and controls, exploring growth through internal operations, and fine-tuning your company's strategy -- are the same ones required to build a successful company.

"Some just choose not to do so in tougher markets because their initial stock price will likely be lower.

In those periods you either see companies waiting for the market to return or selling to a strategic or financial acquirer."Consider a dual-track approach.

"Some people want to change the world when they start a company," says Eric Young, general partner with Canaan Partners, a global venture capital firm that has invested in more than 250 companies over the past two decades. They want to stay small for perpetuity." The right exit strategy depends a lot on the objectives of the people who own the business.

Initially, the founder(s) own 100 percent of the business.

In a strategic acquisition, however, the acquirer may replace you and your team with its own people.

A strategic acquisition can be an excellent solution for companies that are struggling with succession-planning issues, while an IPO or a management buyout will work more effectively for teams that want to stay in charge. Many business owners view their exit strategy as a chance to reap the benefits of their hard work and to increase their personal liquidity.


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