Exit Strategies for my business

Question

Consider different Exit Strategies appropriate for investors in your business. Explain the benefits of each and select your preference. Provide your rationale describing why you think this is the best Exit Strategy for your business.

Answer

Exit Strategies for My Business

Every investor has the intention of making profits as they start a business. However, reasons may crop up that compel the firm to stop pursuing its interest. It is therefore important to factor in an exit strategy in the business planning document that will ensure the continuity of the firm, enhance motivation among the employees, and take care of retention of talented staff who can ensure the continuity of the business after succession. Although there are several exit strategies, three most preferred strategies stand out. The first one is investing in the business to the point that in future a larger organization can easily take over. The second is letting the business go public with Initial Public Offering (IPO) of stock while the third is the managers having the desire to continue running the business taking over with replacing capital gained from the firm’s profit or a different source.

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IPO method advocates for the firm to sell part of the business to the public markets as my management team remain in their position for a given period. Although it is time-consuming and complex, the major benefit that makes firms opt for IPO is its ability to raise capital faster through reaching out to numerous investors(Peters, 2009). The firm can then utilize the cash to progress the business either in the form of infrastructures, expansion or research.  

My firm can as well invest in the business in anticipation of take-over by a larger organization. In this strategy, the business owner develops the business to a level where larger companies dealing with similar commodities develop interest on the assets of the smaller company. The larger company buys the assets of the business at market value ensuring the security of the owner. The smaller company then dissolves and can pay off any debts it owes its financiers. Such trade-off ensures the security of the employees and the business owner.

My most preferred exit strategy for my business is factoring in strategies that give a possibility of the managers desiring to continue with the business to take over either using capital from the firm or other sources. In this approach, managers are identified who have the potential to run the company. These managers are involved in drafting the exit strategy and the succession plan. Once done the exit strategy is followed to ensure the investor still has a say in the running of the business in future. In this scenario, there is continuity as the firm still maintains its workforce and retains the best staff. Likewise, the new owners of the business have the vision of the company and continue with it(Hungarian Private Equity and Venture Capital Association, 2017). The owner remains in business as a stakeholder. Succession in business still ensures that the owner still has a stake in the company.

References

Hungarian Private Equity and Venture Capital Association. (2017). Exit Routes in Private Equity Transactions. 1.

Peters, B. (2009). Early Exits: Exit Strategies for Entrepreneurs and Angel Investors (But Maybe Not Venture Capitalists). Meteor, 1-35.