Every Company Should Have an Exit Strategy

BY Basil Peters

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.