Leaving a startup can be an exciting and challenging time. You’ve accomplished something great. You’ve started a great business that investors look at and think – yes, they definitely want to be a part of that. Whatever your continuing role in the business, if any, there are some steps you can take to make this transition as smooth as possible for all involved.
Tip 1: Make an Exit Plan Early
Perhaps this goes without saying, but far too often entrepreneurs neglect to?plan ahead?for their startup exits. Whether you are looking at an IPO, niche investors, or acquisition, you should have some idea of an exit plan at the very start. Your exit plan can and should drive business decisions at every step of the journey. The best time to start making your exit plan is when you first start your business. The next best time is any time as soon as possible after that. If you don’t have a plan when it comes time to your exit, a smooth transition is going to be difficult. It will probably involve a good deal of hindsight and seeing how you could have made things a good deal easier for yourself and for potential investors.
Tip 2: Exit During the Growth Phase – Better Soon than Later
The key aspects of any exit plan will be the when, where, and who. Of these, the when is most important. In order to achieve maximum return on investment, you ideally want to exit at the?growth phase. Think of this exactly like investing in the stock market. You have already bought low by creating new value where there was none before. Now, you want to sell high by exiting when your business is achieving its maximum value. Far too many investors wait due to poor planning and exit only after the business has peaked. This can lead to dissatisfying results for you and for potential investors alike. The growth phase is when most you need investors, and it’s when investors can make real gains.
Tip 3: Keep Control of the Exit – But Listen to All Parties
The startup is yours, and it is your job to stay in charge through this process. That said, you need to balance investor input against your privileged knowledge of the business. In order to do this, it’s critical to hear what all parties have to say. You are the one who needs to write up a plan and make sure that you keep to its steps and timelines. However, your business partners also have needs, insights, and concerns that you should take seriously, in some cases adjusting your plan to reflect unforeseen changes and possibilities. As the startup founder, it’s up to you to lead responsibly, taking all parties into account. It’s also up to you to confidently and firmly decide when not everyone’s wishes can be granted. Confident, careful handling can help you secure an exit strategy that works for everyone now, giving you the best possible payout. It will also help in the years to come, as you and your business partners continue to work cooperatively with the business you helped found.
Tip 4: The End Is Never The End
Maybe you are ready to retire now. Maybe you plan to transfer ownership and leadership and never look back. Are you absolutely sure? The choices you make now can affect the opportunities you’ll have years from now, when you may wish you’d planned ahead. While planning and writing up contracts, always try to leave the door open to your insights and future collaboration possibilities. If you’ve done a good job working with investors, they’ll be glad to know you have no plans to suddenly disappear.
Exiting a start-up is an exciting time with many possibilities from this point onward. With a little advance planning and work, you can make sure your startup exit will go smoothly, with maximum benefits for all involved. Want help creating a start-up exit strategy that will maximize your returns? Numbersowl offers comprehensive business advising, virtual CFO, and bookkeeping services for start-ups in any stage.
Also published on Medium.