It’s a situation every successful entrepreneur will find themselves in someday…
You’ve artfully crafted a business aligned with your initial vision. And whether your investors are ready to see their return, or you’re simply ready to move on to something new, the time has come to let go.
Hold on a tick! Exiting your startup is not as simple as packing up your desk and handing in your building pass.
Nope – you need yourself a robust exit plan. Here are some of the most common strategies for exiting your startup. And how to plan for them:
Sometimes, two heads are better than one. Same goes for businesses, which might be able to create more value as one new, joint organization.
Stay on the lookout for similar or complementary businesses that might be a possibility for a merge. This is a particularly good option if you’d like to stay involved in an advisory role.
Other companies might want to acquire your business entirely. This differs from a merger because there’s no new company on the other side – rather, your company will be swallowed up, with its assets becoming part of the acquiring company.
Courting companies that you think would benefit from such a deal can help you secure an acquirer – it’s often a more efficient and quicker way for companies to grow revenue than creating new products organically.
Choose wisely, and the value of your business could completely outstrip what you might otherwise earn in a sale.
Some startups can look at initial public offers (IPO); which is essentially selling part of the business to the public in the form of shares.
The benefit here is that IPOs can boost your liquidity, a boon if investors are seeking returns or refunds earlier than expected.
This route isn’t for everyone though. IPOs can cost hundreds of thousands (even millions) to put together. Plus, you'll probably need tens of millions in annual revenue before you're an attractive IPO candidate.
You could potentially conduct a private offering of your shares to individuals or a select group of investors.
Private offerings are less expensive and need less time to conduct than IPOs. Plus, if your investors are entrepreneurs themselves, they can help in the company’s management.
If your business has a steady revenue stream and sits in a relatively stable marketplace, consider making it your cash cow.
Pay off your investors, find someone you trust (who is a good fit with you and the rest of the team, of course) to take charge, and use the remaining dividends to develop your next idea.
The good news here is you retain ownership and enjoy the annuity. But remember: cash cows generally need a little vigilance if they’re to keep making that money milk.
Shut it down.
Simple but effective, liquidation and close is essentially where you sell everything at market value and use the revenue to pay off any remaining debt.
Sure, you're likely to reap the least revenue as a business exit plan, but it may be the best option if you’ve decided enough is enough.
Planning your exit strategy in advance will allow you to leave your business on a high note. It can help to think about it as a succession plan rather than an exit plan – one that sits in line with your general business goals.
That way, your business can continue to thrive long after you’ve moved on.