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Bankruptcy InformationDocumenting the Exit Strategy in Your Business Plan
by:
Dave Lavinsky
All investors greatly desire and are actuated by a clean image of a company’s exit strategy, or the temporal arrangement and know-how
through which they can “cash in” on their investment. This image better comes into focus once
the key valuation and liquidity drivers of the institution are clearly delineated. An first-class know-how
to accomplish this is through descriptions of comparable firms that have had booming liquidity events, either through acquisition, merger, of initial public offerings (IPOs).
It is helpful to show another companies in your market, or similar companies in another markets, who have with success
exited, and how and why these companies were successful. For instance, were they booming since they noninheritable a large client base? Or were they booming since they accomplished fast growth or high profit margins? It is besides important to tie their success to their exit price. Was the exit cost based on earnings or the number of customers the firm had at the time? The business plan should tie these metrics (e.g., exit cost of $X per customer) to the business to determine its futurity price.
The most common exit strategies in business plans are IPOs or acquisitions. Piece the know-how
of exit is not always crucial, the capitalist
often wants to see the decision to better understand the management team’s motivation and commitment to building long-term value. If acquisition is the chosen exit path, then the business plan should detail potential companies that mightiness want to acquire the firm in the futurity and why. Likewise, if an IPO is expected in the future, the business plan should document the fiscal metrics of the institution that do it ripe for this type of exit.
In most cases, investors only do money once
the business reaches a booming exit event. As such, it is critical that business plans explain the expected exit, detail why this exit was chosen and validate a realistic exit price.
Just about the author:
GT Business Plans has developed over 200 business plans for clients that have jointly raised over $750 million in financing, launched many
new product and service lines and gained competitive advantage and market share. GT Business Plans is the sister site of GT Venture Capital
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