In: Categories » Business » Strategic planning » Documenting the Exit Strategy in Your Business Plan
|
All investors greatly desire and are motivated by a clear picture of a company’s exit strategy, or the timing and method through which they can “cash in” on their investment. This picture best comes into focus when the key valuation and liquidity drivers of the company are clearly delineated. An excellent method to accomplish this is through descriptions of comparable firms that have had successful liquidity events, either through acquisition, merger, of initial public offerings (IPOs). It is helpful to show other companies in your market, or similar companies in other markets, who have successfully exited, and how and why these companies were successful. For instance, were they successful since they acquired a large customer base? Or were they successful since they accomplished fast growth or high profit margins? It is also important to tie their success to their exit price. Was the exit price based on earnings or the number of customers the firm had at the time? The businness plan should tie these metrics (e.g., exit price of $X per customer) to the businness to determine its future price. The most common exit strategies in businness plans are IPOs or acquisitions. While the method of exit is not always crucial, the investor 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 selected exit path, then the businness plan should detail potential companies that might want to acquire the firm in the future and why. Likewise, if an IPO is expected in the future, the businness plan should document the financial metrics of the company that make it ripe for this type of exit. In most cases, investors only make money when the businness reaches a successful exit event. As such, it is critical that businness plans explain the expected exit, detail why this exit was chosen and validate a realistic exit price. About the author:
|
legal disclaimer
1) Our website is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringements, please read the Terms of service and contact us to investigate the problem.
2) The E-articles directory team is not responsible for inaccuracies, falsehoods, or any other types of misinformation this tutorial may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. Please read the Terms of service
Useful tools and features
If you like this article (tutorial), please link to it from your web page using the information above. Linking to this page, this is the only way to help us improve our service, the same time providing your visitors with a way to improve their online experience.
related articles
Planning guidelines and policies are statements or ground rules that provide a framework for management decisions and actions that are related to the achievement of organizational objectives. The framework established by these guidelines and policies also affects decisions made within the context of the strategic plan. It is not concerned with day-to-day decisions as long as those decisions are consistent with strategic objectives. This framework, in general, serves three important purposes: It (1) provid...
2. How to Control Interruptions
How much time do you lose each day to interruptions? Thirty minutes? An hour? Two hours? Are most or these interruptions of value? When you are interrupted, do you find that when you go back to what you were working on it takes almost as long to get back to where you were as it took to do the work originally? If so, all the work you did originally and all the time you invested are wasted. If you are one of the many people who are constantly interrupted, you’ll benefit enormously when you use the ideas that follow...
3. What Does It Mean That an Enterprise Is Effective
Fundamentally, an enterprise is effective when it is able to reach its goals and satisfy its objectives. Its goals and objectives must be realistic and reachable and in line with the enterprise’s purpose. From more practical perspectives and in detail, for an enterprise to be effective requires that its functions be executed efficiently in close support of its intent and desired direction. It also requires that the enterprise innovate and renew itself from top to bottom. A basic goal of any enterprise &...
4. Comparing Product Oriented and Customer Centric Organizations
The design and implementation of a customer-oriented strategy, having as a central concept the Customer Lifetime Value (CLV), represents a very good example of a complex operation which necessitates a radical reorganization of the company. Such reorganization is not necessarily in terms of physical structure, but rather in terms of philosophy and process management. In a product-oriented organization, the firm studies the market and its own resources, attempting to create a better marketing-mix offer than the competitors...
Sales Planning Consider the historical patterns of behavior for your customers, your markets, your products, and your competitors. The success of your company depends on the success of your customers. Company sales will be affected by the economy. Identify how future economic events will affect your business. This includes looking at consumer outlook, inflation, taxes, political events, and the business cycle. Ask the sales organization for its input. The salespeople know the customers ...
6. Basic strategies of Business Planning
There are a number of reasons why planning is necessary: The future is not an extension of the past. The rate of change in the marketplace will continue to accelerate. Technological progress is taking place at an extraordinary rate. Regulatory issues require constant attention. Population changes, demographics, and geographic shifts require constant adjustment of marketing strategies. Global competition is common in almost every industry. B...
7. How to Sell Solutions at the Highest Level
Sales take place at different levels. Some sales require what I call the clerk approach. If I’m buying a toothbrush and the store clerk started asking about how often and how long I brush, I’d run. I just need a toothbrush. Some sales require the salesperson approach. If I’m buying a computer, I need to buy one that will help me with the kind of work I do. Knowing the number of gigahertz and gigabytes doesn’t help me much, except to assure me that it’s big and fast. If I am making strat...
8. Strategic Issues and Action Plans for Business Success
There is a lot of talk these days about how this period of prosperity cannot last forever. This is certainly a true statement, because nothing lasts forever. The fact is that many public companies have already begun to report reduced earnings. There are many explanations for this. 1. Companies that sell to Asia or Europe have already been experiencing a recession. Those with heavy investments in the Far East have certainly been having severe problems for the past few years. The Japanese stock market is do...