Business ventures of all types are not always guaranteed of success, regardless if they are backed by an excellent business plan or manned by a talented workforce. However, whether these endeavors become profitable or not, planning an exit strategy is always a must. Particularly in equity ventures, such strategies are very common. Equity investments aren’t like loans where the principal earns interest. Investors do not earn until they cash out of their investment. In addition, entrepreneurs love the idea of starting up a venture and then offering it to investors while still highly marketable. An exit strategy helps optimize a good situation, rather than get out of a bad one. Below are some of the most common exit strategies that have been proven to do financial wonders to both the entrepreneurs and their investors:
1. Merger and acquisition. M&As involve two or more companies being merged or a smaller company being acquired by a larger conglomerate. The businesses may specialize in the same field or work on different functions but still under the same industry. M&As happen not necessarily because one company is failing. Such business agreement is a win-win situation for all parties involved as it offers increased workforce, expanded customer base, increased assets and capital, and combined expertise.
2. Initial Public Offering (IPO). When a company goes public—which means that practically anyone can be an investor—it easily gains additional capital to fuel expansion and other growth plans. IPOs are often considered the quickest way to riches, especially if the public sees a company to be highly profitable.
3. Cash cow. When a venture has successfully established a stable revenue stream and secure marketplace, owners may seek a trusted professional to run it on their behalf, while they build a new fund to develop their next great idea. This way, entrepreneurs retain ownership of the company while enjoying annuity.
The president of Generational Equity, Ryan Binkley has remarkable acumen for performing valuations and building exit strategies for companies of all sizes. More about him can be read here.
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| Image source: articulate.com |
1. Merger and acquisition. M&As involve two or more companies being merged or a smaller company being acquired by a larger conglomerate. The businesses may specialize in the same field or work on different functions but still under the same industry. M&As happen not necessarily because one company is failing. Such business agreement is a win-win situation for all parties involved as it offers increased workforce, expanded customer base, increased assets and capital, and combined expertise.
2. Initial Public Offering (IPO). When a company goes public—which means that practically anyone can be an investor—it easily gains additional capital to fuel expansion and other growth plans. IPOs are often considered the quickest way to riches, especially if the public sees a company to be highly profitable.
3. Cash cow. When a venture has successfully established a stable revenue stream and secure marketplace, owners may seek a trusted professional to run it on their behalf, while they build a new fund to develop their next great idea. This way, entrepreneurs retain ownership of the company while enjoying annuity.
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| Image source: wikipedia.org |
The president of Generational Equity, Ryan Binkley has remarkable acumen for performing valuations and building exit strategies for companies of all sizes. More about him can be read here.
