How to Plan Your Business Exit Strategy in 2023

January 2023

How to Plan Your Business Exit Strategy in 2023

Building a profitable startup is a rewarding journey. But what happens when you decide to exit your business?

All founders have to deal with the idea of leaving a business at some point but roughly 66% of business owners don’t have an exit plan in place. If you leave planning your exit strategy until you’re ready to leave, you’ve left it too late! Early preparation is the key to a successful exit.

What is the best business exit strategy?

M&A (mergers and acquisitions) is a popular exit route that is well-suited to many business goals, particularly for startups.

Pros of M&A deals

  • You will set your own terms for sale and have full control over price negotiations.
  • A buyer is likely to have an immediate need for your product or service.
  • Multiple buyers might bid against one other, boosting the value of your business.
  • The M&A market is remaining resilient despite the global economic downturn – more on this below.

There are other (less common) business exit strategies to consider including management buyouts, initial public offering (IPO), and acquihires.

Whether you’re a budding entrepreneur or an experienced CEO, you need to consider your business exit options carefully.

Suggested reading: Business Exits: Choosing the right strategy

Has M&A been impacted by the recession?

The global recession has caused a significant and prolonged downturn in economic activity and most industries and sectors have taken a hard hit. But what about M&A?

Good news, the M&A market has so far defied gravity and thrived despite the economic crisis. According to McKinsey, the value of large deals increased 67% for the year, peaking at $5.9 trillion – up 37% from 2020.

M&A has had a record-breaking year and shows no signs of slowing down, making it the perfect business exit strategy for most founders.

When should I start planning my exit strategy?

Planning an exit strategy might be the last thing on your mind when you’re busy running and growing a startup – we get it. But the last thing you want is to miss out on an incredible deal because of poor planning!

Planning a startup exit strategy takes time and the earlier you start, the safer and smoother the process will be. Get your startup acquisition ready from day one and you’ll be ready when opportunities arise.

5 tips to plan an effective business exit strategy

  1. Choose the best time to sell: Deciding when to sell your business is one of the biggest decisions you’ll make and you must get it right. You should consider things like industry trends, market demand, and why you want to sell.
  2. Speak to an M&A advisor: Speaking to an M&A advisor early on will help you understand the acquisition market and process. Browsing an M&A advisor directory is an easy way to find an affordable advisor that suits your needs.
  3. Consider what you want to do next: Do you want to head straight into a new business venture? Or perhaps you want to retire and travel? Decide how much money you will need from your business exit to support your lifestyle and future plans.
  4. Obtain an accurate valuation: Having an objective and accurate valuation is crucial when planning a business exit strategy. This will help you avoid any discrepancy between your price aspiration and the actual market value of your business.
  5. Get your management team ready: Potential buyers will look for a company that has a strong management team and efficient business processes that can easily be replicated. Make sure your management team has a strong understanding of your exit strategy and operational setup.

TIP: Stay ahead of the M&A game and be acquisition-ready as early as possible with an up-to-date, well-managed data room.

Join Foundy and advertise your startup for free!

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If you have any questions, reach out to our friendly team.

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