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How to have an exit strategy
Going Into Business? Here's How to Get Out of It
Who in the world starts a business with plans of leaving it? The whole idea of starting a business in the first place is to profit from it, right?
Of course. Thing is, starting a business and then exiting that business is a type of business in itself. That may sound strange, but it's the perfect strategy for individuals who don't want to be tied down to any one type of venture. Some individuals start businesses for the sole purpose of selling them to others at a high profit, and they do so successfully with what's called an, "exit strategy."
An exit strategy describes how a business will end. It details how much money the business will end with, and it details what it's going to take to earn that money. It additionally describes prospective buyers. It's not easy predicting these things, but it's not impossible. You can create a profitable exit strategy with a realistic project value, ideal customer, debt management, and a schedule.
Figure how much your business will be worth in X years by appending a projected return on investment (ROI) to your net present value (NPV). The longer you're in business, and the larger your market share, the higher your business value. If your competition is low and if customer demand increases, your value increases even more.
Your best prospective buyers are those who are excited about your business (that is, as excited as you were when you first started it) and those who believe they can take it into a new direction. Whether they're capable of doing so is irrelevant. Remember, this is an exit strategy. Your concern about what happens with the company should stop the moment you sign the "sold" contract.
You won't have much success selling a company if it's riddled with debt. In fact, your debt will impact your business's value and if it's a large debt, you won't sell it for the billions you dreamed of. Buyers will subtract your debts from your asking price, so work diligently to keep them down during your business's operation.
Timing is everything in business. What trends do you see occurring 5 – 10 – 20 years from now? Will you be able to sell your business during that time? Will it be more profitable to sell sooner or later than originally thought? What events could affect the value of your business?
Just think of the real estate bubble that blew up the economy a few years back. Some investors were smart and sold their properties in early 2005 because they knew the years following would encounter a real estate downfall. Exercise the same precautions in your own exit strategy. Keep up with current events and consult marketing strategists who specialize in predicting trends. Then include what you've learned in your exit plans so that you can create convincing cases of profitability to prospective buyers.
Remember no plan is ever set in stone. Throughout the duration of your business, you'll have to readjust your strategy to reflect changes in both your business and the industry that your business belongs to.
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