Exit
The last critical ingredient is the point at which the investor can expect to get their money back with profit.
The clearer you are in your exit strategy the more likely the investor will sense you are focused on this and in their eyes the more focused on your exit strategy the more likely you are to execute it. Investors like this. Investors enjoy the journey, but they are more interested in the day they get their money back with profit!
It depends entirely on the type of company you are, but knowing your path of least resistance to exit, now, makes it a lot easier to execute it than otherwise.
Determining how you are going to appeal to your buyer. For example if you are building assets (database, IP, contractual relationships) that can be of strategic value to a bigger player, then the extent that your profitability is second to the asset of your buyer, your focus should be on building value rather than cost cutting for example. On the other hand if you are looking at offering a robust financial proposition, and selling the going concern to another buyer seeking similar returns, then your focus should be on ensuring that the financial proposition is rock solid.
There are many ways that an exit could be facilitated and for the record to help you I list them here – not exhaustively
Sale to a Strategic or Financial Buyer
- the sale of shares for cash
- shares for debt (promise to pay)
- shares for shares (merger)
- assets for cash
- assets for debt( promise to pay)
Stock Market Listing
- stock market listing (tiny fraction of businesses succeed here)
Another Investor
- Exchange of shares
Sale back to the company
- Company seeks finance to buy out the shares
Employee Share Plan
- ESOP buys out the existing shareholders
Tip from the Coal Face
It might seem daunting at this stage to be mapping out the actual transaction in your proposition – you shouldn’t. I include for reference. Think more conceptually about who might buy, the clearer you are on who it is, focus on it and the transaction will work itself out.
Try our Pitch Coaching or Spotlight Review to litmus test your proposition, or call us on 02 8003 3004 or reply to this email for more information on how we can help secure you capital for your business.
