One may doubt the entire concept of planning your exit before and during the start your business. Why should one concentrate on that? A logical answer would be instead we should concentrate in how to grow our startup, plan for more investments or satisfy our customer’s needs. While this philosophy is not wrong, one needs to understand that a friendly takeover, acquisition and merger or Selling via IPO is just another business process like product development or financial planning.
Consider ‘Selling your company’ as a mere process, which includes change of roles, during a business transition to the next major stage. Entrepreneurs in this paradigm shift do not necessarily leave the business. Founders who think about an effective exit strategy, whilst establishing his or her crystal clear business strategies, almost every time would improve chances of success for the business and would get the ultimate exit valuation.
Today we will be giving you four Chatur reasons as to why you should make a clear exit strategy…
Increase your company’s value….
It might astonish you, but a study suggests that by just merely designing and enforcing an exit strategy can itself increase the entire valuation of your company by 50% or more. Although there are levers of your business that helps evaluating the valuation, but there is a famous saying that in this age no product development team uses a strategy of, ‘build it, and they'll come!’ That goes for the entrepreneurs as well, you may build a great business, but a poor exit strategy can seriously hamper your company’s total value.
Before you sit down with a cup of coffee to envisage and embed your startups financial strategy, give a part of your determined focus on the exit strategy. You would be surprised to know that many companies have failed miserably after gaining few rounds of success, just because they couldn’t get a compatible exit strategy to meet their investor’s demands. It’s predominant that you understand and meticulously review your exit strategy from time to time to keep it aligned with your investor’s interest. Should you go the bold way by going public (IPO)? Or should you find a cozier route of acquisitions and mergers? Or should you sell it a friendly buyer? These are some questions that any and every entrepreneur should have an immediate, and confident answer for when the time is right. Whatsapp, which started off as a free messaging and multimedia-sharing app with no form of concrete revenue model was sold to Facebook at a staggering $19 billion in an acquisition deal.
Secure your investors….
The term angel investment cannot be taken as lightly as literally thinking an angel will come and fund your start up. If you think in that way then its time that you burst the bubble you are living in! Angel investing is very uncertain and a complex world, where every angel looks for a meticulous exit plan every time they meet any entrepreneur. They want to understand first hand that the founder has thought his venture to the point that when the time comes which companies could acquire his business. So whether it is VC or an angel they all wish to know what role they will play when the firm makes an exit. Before you think, why would an angel care if my business has picked up well? To answer that you need to understand that an angel prefers to invest in not one, not two but as good as 10 companies. Because they know that even one company can bring them a fruitful return on their investments. So when a company has a clean exit plan it makes their investment safe and secure.
Keep your options open…
There are uncountable reasons why you might just want to keep your options open apart then the reasons I mentioned above. If you are in e-commerce some big large player might give you a deal through acquisitions that may be too hard to resist, or simply you might want to merge with a big player to scale your market reach. Uninvited illnesses and invited family issues can come at any time and usually it takes a lot of time and you may not get to run and focus on your business at the optimum level. Recessions, technology shift, product trends, age, Pursuing other goals etc. can also be some good reasons as to why it may be your time to move on!
So the next time you have a chatur idea and you start making your business strategy, don't forget to research on who might buy you out in the near future!
If you too have entrepreneurial dreams, you need to have faith in your Chatur Idea. You will always wonder who will fund this idea and from where will you find investors. In that case, you can participate in the #BeAChatur Contest and not only be mentored, but also stand a chance to win a whopping Rs.10 Lac funding for your dream startup idea.