| All investors greatly desire and are motivated by a | | | | of customers the firm had at the time? The business |
| clear picture of a company's exit strategy, or the timing | | | | plan should tie these metrics (e.g., exit price of $X per |
| and method through which they can "cash in" on their | | | | customer) to the business to determine its future price. |
| investment. This picture best comes into focus when | | | | The most common exit strategies in business plans |
| the key valuation and liquidity drivers of the company | | | | are IPOs or acquisitions. While the method of exit is |
| are clearly delineated. An excellent method to | | | | not always crucial, the investor often wants to see the |
| accomplish this is through descriptions of comparable | | | | decision to better understand the management team's |
| firms that have had successful liquidity events, either | | | | motivation and commitment to building long-term value. |
| through acquisition, merger, of initial public offerings | | | | If acquisition is the selected exit path, then the business |
| (IPOs). | | | | plan should detail potential companies that might want |
| It is helpful to show other companies in your market, or | | | | to acquire the firm in the future and why. Likewise, if |
| similar companies in other markets, who have | | | | an IPO is expected in the future, the business plan |
| successfully exited, and how and why these | | | | should document the financial metrics of the company |
| companies were successful. For instance, were they | | | | that make it ripe for this type of exit. |
| successful since they acquired a large customer | | | | In most cases, investors only make money when the |
| base? Or were they successful since they | | | | business reaches a successful exit event. As such, it is |
| accomplished fast growth or high profit margins? It is | | | | critical that business plans explain the expected exit, |
| also important to tie their success to their exit price. | | | | detail why this exit was chosen and validate a realistic |
| Was the exit price based on earnings or the number | | | | exit price. |