… investors will get their return on investment by …
The final part of our business plan is the exit strategy or exit plan section, this is simply a statement explaining how the investors will eventually realize their return on investment. Investors will always look to see what their exit strategy is before investing, some are prepared to wait a long time for their return, others have time restrictions placed on them by their own lenders.
All businesses have a life cycle, they start, grow, and mature, at which point a decision needs to be made about the direction the business will take. The exit strategy is an important part of the business plan, and to avoid costly mistakes and limited options in the future, the plan should be geared towards the exit-strategy from the beginning.
Exit Strategy Presentation
There are numerous forms of business plan exit strategies including:
- Sale – Sell the business to someone else for cash
- Merger – Merge with another business for shares in the combined business.
- IPO (Initial Public Offering) – With an IPO exit strategy shares are traded on a stock exchange, and sold to the public.
- Buyout – Sell to a buyout team who take over and run the business.
- Liquidation of assets – The business is closed down, assets sold, and the cash distributed
The example below gives a simple brief statement about the exit options.
This is the final part of the financial projections and Contents of a Business Plan Guide, a series of posts on what each section of a simple business plan should include.
The rules regarding the raising of finance from potential investors are complex and vary from country to country. Professional advice should always be taken before discussing or issuing a business plan.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.