Going under happens more often than you can imagine. Almost 70% of all startups reach the end of their venture long before their business model predicted. Because of that, even those who have built strong foundation and happened to have a good stroke of success, cannot afford to get complacent. While there is no foolproof way to success, one can learn a lot by studying others failures. Furthermore, basing your predictions solely on the positive sides is like willfully stepping into the quicksand. Thats why you need to have a solid exit strategy imprinted into your business plan.
The Avenue of Escape
Continuous learning and developing is one of the key requirements of all business endeavors. Locating the potential pitfalls that lead to your financial demise are as important as figuring out the potential selling points. When you consider this constant whirlwind of change, the only thing that stays the same is your exit plan, and you need to be clear about that.
No matter what your initial targets are – getting listed on the market or passing the established business onto the next generations – your business ship is bound to go through some windy waters. There are big temptations and challenges at every turning point in the life cycle of the enterprise. One of the most common mistakes that entrepreneurs usually succumb to is overspending. This is not surprising, since most of the decisions made in these turmoils are aimed overcoming the issues caused by the negative cash flow.
Managing your expectations is a paramount task, thus you must force yourself to stick to the targets and objectives you can actually deliver. What actually might help is to make a clear priority of all the tasks and ha an overview of all the factors that might lead to a possible disaster. To do that, your enterprise must have all vital business processes in clear scope, every step of the way. This will lead to achieving satisfactory product/service quality, making your business model as clear-cut as possible and providing customers with excellent services. On top of everything, it will provide you with a clear overview of your cash flow, which is what youre always looking for.
Having a killer product is nothing if you cant make sure that you can effectively deliver it on the market and service your customers as well as they deserve. One way to deal with this is to protect your products from unloyal competition who can cut you down with low prices. The most obvious solution could be a business merger: Two or more enterprises can create more value and deliver it more efficiently, while also dispersing the risks of failure.
When the time seems right to prep for shipping out, some entrepreneurs opt for let it run dry exit tactic. It refers to the situation where you increase the personal salary and pay yourself a bonus. Note that at the same time, one should still strive to handle the debt. Another priority is to liquidate any remaining assets, and sell them at a market value. In partnerships, on the other hand, retiring individuals most often decide to sell their shares, preferably to the existing partners or a new employee.
Being too eager to sell might put you at a disadvantage in potential negotiations. To make things worse, the internet market boom has revealed numerous potential dangers in the stock market. Namely, the IPOs prices fluctuate heavily, and take a prolonged period of time to prep. To cover the cost, though, one can go public and conduct intermediate funding rounds. The companies seeking to acquire other businesses want to keep the value for themselves, but the seller must not fail to come up with the own business valuation.
The labyrinth of heavy decisions and their consequences often leaves business owners baffled and unable to respond to imminent challenges. Outsourcing the accounting and financial reports can prove quite beneficial for many businesses that dont possess either resource or knowledge to successfully tackle these key business functions. Weve talked with representatives from Pherrus Financial Services and they pointed us to the number 1 reason of why enterprises fail in Australia – and that is a tax death due to the inability to come to terms with the financial aspects of leading a company.
Selling outright is seen as an easy exit, and it provides you with the money from the sell or some equity in the buying organization. However, the list of possibilities does not end here, and you might have some other ace up your sleeve. Bear in mind that corporations adore startups that are just taking off, and will not hesitate to snatch the diamond in the rough.
Exit The Stage
To many people, it seems counterintuitive to think about abandoning the dream of owning a startup company. Even worse, when you have just managed to turn it into reality. The initial enthusiasm wanes, and once you reach a certain point, the fun is gone. Yet, less-than-stellar business stories can hold more wisdom that those depicting glam and success. Do not let your ego, overconfidence and dreams cloud your judgment – always consider what comes after. If you can, get out of the firm cleanly, with earnings from the sale in your pockets. Its much better than fighting a losing battle to the bitter end.