Exit Strategy: An Essential Part Of Your IT Business Plan

By Christine Kern, contributing writer

Entrepreneurs often focus on launching and building their businesses, hoping to see them flourish and grow, but planning an appropriate exit strategy that allows you to get your money back at the end of the journey is just as important to consider: the “exit” in exit strategy is what allows you and your investors to receive ROI. 

Here are eight exit strategies to consider on your way to realizing that goal:

An article in Entrepreneur magazine lists exit strategies, including “The Modified Nike Maneuver: Just Take It.” This exit strategy is based on the concept of taking the profits on a daily basis rather than reinvesting in the company, bleeding out the assets.

The article also discusses Liquidation, where owners simply close the doors and sell off the assets to repay creditors. The remainder goes to shareholders, and then to the owner. As Entrepreneur points out, however, liquidation is often a waste, since valuable assets such as client lists, reputation, and business relationships are destroyed without an opportunity to recover their value. Chron calls this plan “Feeding It To The Chipper” and states this option is often chosen for companies characterized by poor financial performance, lack of viable markets, or investor impatience.

Business Insider provides its own list of exit strategies, that points out another choice is Merger And Acquisition (M&A), usually merging with a similar company or selling out to a larger company. This can be a beneficial arrangement for companies that have complementary skills, helping them to save resources by combining. 

The Chron article also lists the options of Owner Buyout, in which an agreement is struck between an employee group and the investors, stockholders, or lien holders to transfer ownership and buy out their interests, and Going Public, in which you sell shares publically. Entrepreneur warns, however, only a low percentage of small businesses have actually been able to take the IPO (initial public offering) path, since very few IPOs are completed annually in the U.S.

Another exit strategy is to arrange a Friendly Sale as a way to “cash out” and pay investors and yourself. Business Insider says “the ideal buyer is someone who has more skills and interest on the operational side of the business and can scale it.”

In a strategy related to the Nike Maneuver mentioned above, Business Insider says for businesses with a predictable revenue stream, you can “Make Your Business Your Cash Cow,” finding a trustworthy manager to run the company and using the remaining cash to finance your next big idea.