Business Plan - An Exit Strategy
Thursday, December 09, 2004
Businesses, especially high profile, high risk Technology based ones must have a mandatory exit strategy as a part of the business plan. Nothing pleases a Venture Capitalist more than seeing a well laid out exit plan, where he / she can get his / her money back(hopefully with a reasonable return) and exit your company. They look for an exit plan of roughly 3 to 7 years (10 years in case of nano or bio-technology) and ofcourse high returns. There are some well established exit strategies you can offer in a business plan:
* Franchise the business
* Initial Public Offering (IPO)
* Merger / Acquisition
* Buyout by partner
* Handing down the business to another family member
Due to uniqueness of each business, exit plan should be custom made taking into account, business life-cycle, management needs, competitive environment. Plan should also be customized to include provisions for death, divorce (marital or business partnership) and disability.
Some fallacies to avoid:
* Never ignore your personal goals when planning an exit strategy.
* overconfidence about your business's potential to go public.
Bottom Line: The most effective exit plan will take into account business, personal, and investor goals. Business plan, being the road map for your company, a well thought out exit strategy defines a future destination when your investor can expect to reach liquidity.
This concludes the series on components of a Business Plan. Tomorrow I will write about "putting it all together" and include an index to each component of a business plan.
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