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T ypically, the exit strategy is not covered as a section by itself in the business plan. It may be subsumed within the financial section. However, the exit strategy is important especially to investors who are concerned with the amount of potential returns and when these returns can be withdrawn from the company. These are the two key aspects which need to be covered in the exit strategy.

So what does the exit strategy entail? The form of exit may differ from company to company. So, it will be crucial to pinpoint what form of exit will be apt for the type of company being established. Many entrepreneurs perceive public listing as the only way to allow investors to realize their returns. Even though this form is usually preferred, having dividends or profit sharing are other means of returns that can be considered.

Investors aside, the question of making an exit is of great concern to the entrepreneur, management team, employees and other stakeholders. This section should clearly spell out the forms of returns and exits for each stakeholder. In this way, each stakeholder can be motivated to do their part.

An exit strategy that is detailed and well thought out guides stakeholders to evaluate what form of returns can be given to stakeholders at different stages in a company’s life cycle. It also will provide a gauge as to when an exit can be planned in the execution phase.

Ultimately, an exit plan is incomplete without milestones and conditions. Examples of milestones include a certain level of profitability, revenue and acceptance in the market. Conditions can be the level of cash left, future cash needs and the consensus of the key stakeholders before an exit strategy can be executed.  Therefore, think about your exit strategy carefully so that you are prepared at every turn.

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