Early Exits (Part 2): Exit Strategy Planning and Process

By: Alan Curtis & Belle Raab

Last week we posted a blog introducing the concept of Early Exits. The content was derived
from research completed by author and exit strategy thought leader, Basil Peters.

Now that you have an understanding of the prevalence of Early Exits, we want to delve into how to start developing your exit strategy and what you can expect the exit process to look like.

Planning Your Exit

Innosphere discusses the topic of exit strategies with all client startups who come through our program. Inevitably, this subject invokes a looks of surprise or fear on at least a handful of founders’ faces. Their expressions read, “I do not even know where my business will be next week, let alone next month, how am I supposed to know my exit strategy in a few years?!” If you are like most first-time founders you may be asking yourself this same question.

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Although it may seem too early to be thinking about planning your exit, this process is one of the most important parts of starting a business. Planning with the end in mind will help with team alignment, raising capital, and identifying the right acquirer. All steps are necessary to ensure a successful exit.

You can begin conceptualizing your exit strategy by simply processing through this statement:

I want to sell my business for $___ in ___ years.

This will get you thinking about the value of your company and shows investors you are planning with the end in mind.

The next step is to inform this statement by gaining an in-depth understanding of the merger & acquisition landscape, industry trends, and the macroeconomic state. More to come on how to go about this type of research in another blog.

What to expect during the exit process

The exit process can seem both exciting and daunting as you sell something you have tirelessly built for several years. The merger or acquisition process typically takes 6-24 months and follows a set of steps which we’ve broken down for you.

  1. Preparation: 
    • Confirm that team members, investors, and shareholders are aligned with exit strategy and timeline
    • Get data room materials in order (financials, projections, and presentation materials)
  2. Research:
    • Perform a strategic analysis of target sectors and industries
    • Create multiple buyer lists based on previous acquisitions or perceived opportunities
  3. Building the Sales Funnel: 
    • Execute NDAs and screen interest from buyers
    • Site visits and technology review
  4. Due Diligence:
    • Negotiate bids and letter of intent
    • Share data room materials
  5. Contract:
    • Sign contact and file regulatory information
    • Receive payment
  6. Integration:
    • Set up team to mitigate risks during transition

These steps were developed based of the work of Mark Tepper and John Warrillow.

Innosphere Early Exit Program

Planning and executing on an acquisition can be overwhelming which is why Innosphere has developed a program that helps startups and their investors plan for and achieve successful early exits through active management and a higher engagement of Innosphere resources.

 

If you are interested in learning more about Innosphere’s Early Exit program contact Mike Freeman, Innosphere CEO, Mike@innosphere.org.

Be sure to look for another blog next week for more tips on how to achieve a successful Early Exit.

 

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