Business Strategy 15. Exit Strategy
You must always answer the question…
Before you get in how are you getting out?
Most business people never think about how they are going to exit and tragically often close a business or sell it for next to nothing when they are done.
Understand and build capital value
Profit alone does not mean a business is worth a lot of money. Look at all the strategies of the Billion Dollar Sales Machine. THAT’s what makes a business both saleable AND valuable.
Make your business investor / sale ready
Funnily enough very few business are sale ready and all businesses should be. In fact as a discipline it’s worth preparing your Investment Memorandum as soon as you can. Can’t do it? Then you’re not ready.
When offered – Take the cash
If there is one thing I have learnt from all my multi-millionaire and sometimes billionaire friends and my own experience, that is, when somebody offers you a reasonable price for your business, take it.
That opportunity may never come again.
I sold one of my business for $300,000 (a fortune for me at the time) to a multinational who was annoyed at us taking their market share. They shut it down the day after they bought it. Within a year they were bought out and its unlikely the opportunity would ever have been offered to us again.
I was also offered $50million for my financial services business on an IPO at the top of the market, fully under written. I always had in my head that I would cash out when the business was worth $100m and despite the advice of more experienced colleagues I said “no”.
A year later the GFC hit, valuations of financial services business (and our profits) evaporated and the business was eventually sold for about its debt 3 years later.
Take the cash!!!