Every Company Should Have an Exit Strategy

Every company should have a signed exit strategy. This is especially critical before contacting the first external investors. Different investors are compatible with different exit strategies. Getting this wrong can actually kill the company. The exit strategy is the foundation for the entire company plan.

Key Points:

  • All companies can be divided into two types
  • Only one of those two types works for investors
  • The exit strategy is the plan for the business – the entire business
  • I often hear ‘companies are bought, not sold’
  • Optimum exits require strategy and planning
  • A focus on exits does not distract the team from their primary function
  • The exit strategy affects a surprising number of daily business decisions
  • An Exit Strategy can be as simple as:
  • “Our exit strategy is to sell [company] in about __ years for around $ __ million.”
  • Entrepreneurs usually need some help determining their optimum exit strategy
  • First: Exit Strategy, Then Finance
  • Different types of investors are compatible with different types of exit strategies
  • Making a mistake about this early on can easily cost you your entire company
  • A common misunderstanding is that you have to grow the company to be profitable
  • The real threshold is to ‘prove the business model’
  • The exit strategy is the highest level strategy in the organization
  • It’s the foundation for the entire company plan

This post has more on why a clear exit strategy is important for every company.

6 thoughts on “Every Company Should Have an Exit Strategy”

  1. Dear Basil Peters,

    Greetings from India. What an inspiring video on Exit Strategy. It looks as if you captured my first venture failure, because I too suffered from not having exit strategy for my investor and I lost 10 years of valuable time. In 2005, I tried my best to exit, but failed as my VC did not appreciate it. We never made money and it is 2015 the company remained in shell mode.

    Since 2012, through ZEDiQ initiative, I am mentoring startups and early stage companies and unknowingly pushing them to sell the ventures when they are ready to go. Most of the times I failed as they are too possessive!

    I am now looking at starting a venture capital fund based on my advisory role and four ventures I experiences myself. I am delighted to find your link on my googling.

    Hope to hear from you and continue to seek your advices, moving forward. I am partnering with a Silicon Valley ex-employee who worked on several startups. He is back in India like me after decade plus stunt in USA.

    Regards,
    Siva K Gowravajhala, CEO
    ZEDiQ Consulting.

  2. Hi Basil!

    Your articles and comments are very interesting and useful. I am a PhD student in Finance in Brazil and I am really enjoying to read (and listen) your comments.
    I am a deep enthusiast of M&A world, specially applying Real Options to evaluate some transactions. My focus is to understand the impact of some contractual mechanisms (clauses) on the deal value.
    Your mindset / point of view about exits is awesome!
    Hope keep in touch.

    Best,

    Igor

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