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Planning a Graceful Exit Strategy

The last section of your business plan is the exit strategy. To attract investors, you have to develop an exit plan so that investors can get their money back and exit your company. Potential investors want to know your long-term plans which you can outline in the exit strategy section of your business plan.
Planning a Graceful Exit Strategy
Planning a Graceful Exit Strategy

Your exit plans can impact the way you operate your business. For example, if you plan to pass the business to your offspring, you need to start training them at some point. Here are some strategies that you might want to consider when you are planning a graceful and perhaps profitable exit strategy.

This is the most common exit strategy where the business owner sells the business to someone else or to a company. If you have done a good job of building your brand value, a competitor or a conglomerate may see that your company can fit into their long-term strategy.

A merger is when two businesses get together and create more value as one bigger company. If your business has a good merger opportunity, then you may consider it as your exit strategy.

Another exit strategy is to be bought-out by someone who takes over your business. This usually happens with small-size to mid-size businesses. A typical buyer is an individual or a group of individuals who is in the same industry and takes over your business on the basis of buying out your ownership of the business. This type of deal is often tied to the business performance at the time of the buyout and after you leave. You can get a better deal if the acquiring company pays you upfront rather than leveraging the future cash of the business to pay you off.

Liquidation of Assets
You sell all your assets at market value and you can use the revenue to pay off your debts, then shut your business down. With this type of exit strategy, you don’t get much money because you are just matching your assets with buyers, you are eager to sell and therefore you are at a disadvantage in the negotiation.

Initial Public Offering
While businesses use IPO or Initial Public Offering to raise capital, it may also serve as an exit strategy for business owners and investors. There is a chance that you can get the biggest payout with IPO as your exit strategy, but it is very expensive to obtain an IPO. You may spend half a million dollars on attorney and accountant fees. It is recommended that businesses use other exit strategies than IPO.

Planning a Graceful Exit Strategy
For entrepreneurs, it is not enough that you build a business that is worth a fortune, but you have to be sure you have a good exit strategy so that one day, you can get all your money back plus interests and profits.

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