What is an exit strategy?
An exit strategy is a plan for leaving a business. It can be personal (i.e. a plan for an individual Founder or business owner) or for a group of people (Board of Directors, key shareholders etc.).
A strategy to exit sets out how that departure will happen. Most commonly, the goal of exiting will be some form of sale (e.g. a merger, acquisition, IPO or buy-out), particularly when exits are planned early on. However, there are other forms of exit, including liquidation or bankruptcy.
For a guide to the most common exits, check out 7 exit strategies for founders and start-up business owners.
Why you should plan your exit early?
What does exit planning look like?
Being prepared with an exit strategy means you have a clear plan for:
– How you will leave
– Have due diligence ready to go
– Investors understand your intentions
-Key communication lines are established
– You have plans in place for employees and assets.
Here are five reasons to plan your exit early
1. You never know when the right opportunity will come along
2. An exit plan helps you define what you want from exit
As a business owner, you must be clear about what you want from an exit. An exit strategy can help you to consider:
- What your financial goals are for exit;
- What will happen to the business after exit (including its employees and assets);
- Whether you will continue to have any involvement in the business after exit; and
- How long exit will take and what transition arrangements are required.
Knowing the answers to these questions is essential for founders, key stakeholders and employees.
3. Your exit strategy is also a framework for growth
4. An exit strategy can secure investment
5. An exit strategy can reduce risk and minimise disruption
Specialist exit planning advice for your startup
We provide stage-specific legal advice to start-ups and entrepreneurs to help them grow, and ultimately exit, their business on the best terms.
We can help you to identify an effective exit strategy and provide advice on mergers & acquisitions, management buy-outs and buy-ins (MBO / MBI), reorganisations and restructures, and buyer and seller due diligence.
We can also help you with key preparation steps for exiting, such as due diligence. Check out our guide on Due diligence for start-ups & how to set up a data room, where you can also download an example data room filing structure.
To speak to us about exits or to find out about our exits packages of legal advice and support, contact us today.