When you’re in the first few years of starting your company and are living through the relentless daily juggle of managing cash flow, product development and hiring, an exit of any kind can seem like a pipe dream. However, in the midst of all of that activity, it’s worth taking some time out to visualise where you would like to be in five years time. If you’re hoping to materialise an exit then it’s worth planning now for your ideal scenario.
Among all the founders that we’ve worked with, the most successful had a clear timeline and vision of what they wanted to achieve.
Here are some of our key learnings, both theoretical and very practical, and how it pays to plan.
Five years is a good timeframe
Whilst the last year may have demonstrated the possibility for disruption of any kind of long term plan, it is important to have a vision of where you would like to be in five years time. For example, when you look ahead do you see yourself still running the company? Or has it grown to a size where you need to bring in an experienced CEO? Many of the skills that founders need when starting out change over the lifecycle of a business. Your focus may change, your interests may change and that’s ok. The business needs you wherever you can add the most value, whether that’s product development, sales or perhaps as chair of the board. Consider if you want to still be involved in some capacity or if you’d prefer a clean break. Write down or mindmap how you visualise your life in five years so that you can work backwards from there.
Reflect on your ideal exit
Have you always dreamt of ringing the bell at the stock exchange for your company’s Initial Public Offering (IPO)? Or would you prefer to sell all or part of your shares to a private equity firm? Have you considered selling your business to a large corporate? If it’s the latter then it’s worth drawing up a list of companies that you think would be interested in your business and starting to build relationships with them early on. Acquisitions and sales are typically many years in the making through building relationships that develop over time (typically >12 months).
Plan backwards from the goal
If you know where you want to go, you can start planning the journey. Take your vision and start to turn it into an achievable multi-stage plan. For example, if you’ve decided that you’d like to IPO your company in five years time, begin by researching what an IPO involves, speak to founders who’ve done it before, speak to an adviser about what best practice looks like and how other companies have done it. Break down your ideal exit plans into manageable steps.
Get good advice from the start
We would say this wouldn’t we? (!) but it pays to get good advice from reputable accountants, lawyers and other advisers. Good advisers can help you to set your company up to operate successfully from the start. Poor advice and badly structured contracts can lead to big reductions in the final sale price of the company.
Make sure your financials are in order
Many startups try to save money and do their accounts themselves or use an inappropriate solution for managing their finances. This may work at the start but as soon as you start looking for outside funding, investors will want to see a set of robust accounts with information that they can rely on. It’s much easier to set up the processes properly from the start than to have to go back and adjust retrospectively.
Build a good team around you
The companies that succeed have a good team at the top. In our experience, buyers want to acquire a team and not a one man or woman show. The hiring decisions that you are making now may be those that help get you through a successful exit.
Of course, plans may change and a five year plan is only one version of the truth. But we believe it’s worth doing so that you have at least considered what an exit could look like for you. For more information on exit options, check out our other articles on corporate venture capitalOpens in a new window, the IPO journeyOpens in a new window and the Raise ProgrammeOpens in a new window.
