Now that we have found five main reasons to develop an exit strategy, let me share three main options that you might use in your forecasting.

  • Sale to a friendly buyer
If you become attached to the company you are building, you may dream of a friendly buyer takeover, such as a family member or a friend, or a friendly angel, or a long-term client or borrower. However, the friendly takeovers — as much as they seem smooth and attractive – might hide a few challenges.
Tips
  1. Make sure to conduct a thorough due diligence. You don’t want any skeletons in the closet for either the buyer or the seller.
  2. Be sure you do not mix friendship with business. That is like mixing oil and water. Be honest and professional.
  3. Do good paperwork and make sure it benefits both sides.
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  • Acquisition
This option seems more likely in a heated business world, particularly in the tech world; but this exit option does not have to be hostile. It is possible for you to be driving this move so that you can cash-in and build your new idea. The good parts about this option are that you decide WHEN and HOW you are going to sell your company. Unlike an open market, the price paid here is a perceived price, so you can smartly choose when to do it. 
Tips
  1. Make sure you do not start a sale when the company is already dying.
  2. Search for a good strategic fit. This might be beneficial for both sides, and you might decide to stay mid-term under a management contract to boost your company to another level with a strong, strategic partner who is financially liquid.
  3. Having multiple potential acquirers is always a smart choice.
  4. Oh, and yes, do your paperwork well; lawyers’ fees often cost a lot!

 

  • IPO
Judging from newspaper headlines, IPO seems to be so easy, always successful and a glamorous option. Been there, done that! It is everything but glorious and easy. If you are a bootstrapped company, the dream of IPO might be too far-fetched. For IPO, you need to reach a certain size and substance — and we are not talking about millions here. You have to add two or three more zeros before you even start! Nonetheless, the major issue with IPO will be the demand and pressure on your time and capacities. You may suddenly feel that instead of doing your business, you are only doing things for investors and all those who require reporting. You might think that fundraising is time-consuming and stressful; wait until you start IPOing!
 Tips
  1. Make sure your company is of proper size, substance, and maturity before you hit the markets. Don’t be fooled by the promises of those who will make money on fees, even if you fail!
  2. Make sure you have a team to support you or you will risk stopping to do business due to investors’ demands. You will actually spend more time selling your company than running it.
  3. You might be asked to reorganize your business before you hit the market. Be sure to have the proper strategic advisors for this.
  4. Oh yes, once again, do your paperwork well!