Do I Need an Exit Strategy?

Exit Strategy. . .every startup needs to understand the importance of this when starting up.  Many startups don't necessarily plan their exit strategy at the beginning, as it seems, well, almost silly to think about the end when you're just starting up.  However, having an eye on the future can help you to plan the stages of your startup, and work out the best way to achieve that future.  Knowing that you are working towards eventually selling the startup to a bigger player (for example) may allow you to focus your startup development.  

Some common exit strategies, from

  • Taking it constantly:  This strategy means paying yourself a good salary, and not working too hard.  You will take profits out of the business continually, allowing it to be profitable, but not to grow too big.
  • Liquidation: Just up and selling everything fro whatever price you can get.  Not really an option or a desire for most startups. . . ideally you want to get as much as possible out of your hard work!
  • Selling to friendly buyer:  Could be someone working for the business, or a customer, or keeping it in the family.
  • Acquisition: Selling to another business, whether complimentary or not.  Could be a competitor, or just another company wanting to add to its portfolio.
  • IPO: This is the sexiest and flashiest option for startups. . . and the one with most potential for profit and pain.  IPO means Initial Public Offering, which means going public with a shares in the company, selling stock of the company on the stock exchange.  It is extremely difficult to do this, and means a lot more work.  However, if you can pull it off, the rewards could be massive. . . 

Any exit strategy is something that develops over the life of the company. It is not decided or put in place all at once. But it is something that smart startup founders begin thinking about from beginning. A good exit strategy is the only way you can ensure that the time and money you invest in your business over many years will pay off.