Finance

How to create an exit strategy for your business

A series of paper lines flying above a blue ocean, with one in bright red symbolising the best exit strategy

Whatever your business, product or service if you ever plan or are considering the possibility that one day you might exit your business by selling it, you need to develop an exit strategy as soon as possible. An exit plan for business will help you to build and structure your business correctly, making it more likely to sell your business when it comes enabling you to successfully exit in the process.

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I was recently invited to pitch my startup concept to a leading tech incubator based in London. Let me tell you, this was fish on bicycle territory for me. Pre-pitch and I tried on five different outfits (what do you wear at these super cool places?), practised some insouciance in front of the mirror, before heading off to ‘White Bear Yard’ in Clerkenwell. It could have been a humbling experience.

Rather than my anticipated presentation to a coterie of key decision makers across a calm boardroom table, I found myself squeezed between a ferocious game of ping pong and a poorly organised scooter rack, trying to explain my ‘not quite cutting edge enough’ concept, to someone born during John Major’s reign. Worse, his contorted facial expressions indicated, that he found my concept to be as attractive as spending six months in an international space station with NASA’s most flatulent astronaut. “We’ll call you …. “ was his only contribution …

But actually, I loved it. If business is the new rock n roll, then White Bear Yard is our Sun Studio – walls quivering with the energy of ideas and the expectation of an acquisitive approach from Google. So my thoughts returned to what I know best – corporate deals – and how a lean startup can achieve a high-value exit.

“Today, the optimum financial strategy for most technology entrepreneurs is to raise money from angels and plan an early exit to a large company in just a few years for under $30 million” – Basil Peters, Early Exits.

Exit strategy planning for businesses

Here are the core tenants you need to think about in order to create an exit plan for your business, remember its always better to prepared than not, especially when it comes to a business exit.

1. Why think about an exit now?

2. Why lean is good

3. Acquisition strategies

4. Why entrepreneurs should focus on exit

5. What is an exit strategy?

6. Timing

7. Doing a deal

8. Risk of not thinking about these issues

Can I exploit my intellectual property?

Make sure if you have a patent, trademark, copyright (e.g. software) to transfer into your newco or have licensed some technology from a third party, that you have done so correctly and that all creators have duly signed appropriate transfers of their rights.

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Where you have third-party IP, do your due diligence on the third party, and if they are not the patent holder/inventor/creator, make sure that person is either an employee of the transferor or is a party to the licence or technology transfer agreement.  At some stage, a potential investor or purchaser will do due diligence on your company, and they will look very closely at your intellectual property.  That is not the time to find out you don’t own what you thought you owned.

This article is indebted to an excellent slideshow created by Venture Archetypes. They, in turn, were indebted to a chap called Basil Peters, author of Early Exits. Proof indeed that little in life is truly original (only one song from the Stones debut album was penned by Jagger/Richards). I’ll leave the pursuit of originality in the hands of those sexy startups at White Heat Yard.

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