Introduction to Stage 9 – Exit
At this stage the entrepreneur is focused on exiting the business and making their separation permanent. An exit strategy will give the entrepreneur a way to reduce or eliminate their (Teece, 2010) stake in the business and, if the business is successful, make a substantial profit. This stage removes the entrepreneur from primary ownership and decision-making structure of the business. To do this the entrepreneur needs the focal competencies of negotiation, merger and acquisition. Common types of exit strategies include Initial Public Offerings (IPO), strategic acquisitions and management buyouts. The organisation at this stage is generally profitable, has a definable set of resources with a clear and realistic strategy to continue. The CEO and founder(s) are separate.
Exit Stage Compendium
The Exit stage, being the final phase in a business’s lifecycle, focuses on the closure or transition of the business. This could involve selling the business, merging it with another entity, or winding it down. Here’s an expanded analysis of this stage, primarily drawing from the academic paper and other sources:
- Significance of Exit Strategy: Having a well-thought-out exit strategy is crucial as it prepares the business for unforeseen circumstances and ensures a smooth transition or closure, maximizing value for the entrepreneur and stakeholders12.
- Forms of Exit: Exit strategies vary significantly based on the entrepreneur’s goals and the business’s condition. Common forms include selling the business, merging, or acquisition. For instance, the acquisition of Instagram by Facebook in 2012 stands as a notable example of a successful exit strategy.
- Financial Resources & Planning: By this stage, a business has substantial financial resources, enabling detailed operational and strategic planning. The established financial systems further assist in evaluating the best exit strategy3.
- Management and Staffing: With a decentralized management structure, experienced staff, and well-developed business systems, the entrepreneur can focus on the broader picture while the management handles day-to-day operations. This organizational maturity is vital for orchestrating a successful exit.
- Innovation and Intrapreneurship: Engaging in continuous innovation and fostering intrapreneurship are crucial for maintaining market position, which in turn, enhances the business’s attractiveness to potential buyers or merging partners4.
- Entrepreneur’s Role: The entrepreneur’s capability to coordinate multiple activities is essential for either maintaining or growing the business until the exit. Their visionary leadership is pivotal in navigating the complexities of this stage.
- Legal and Compliance Aspects: Ensuring compliance with legal and regulatory requirements is fundamental to avoid complications during the exit process.
- Global Examples: Besides Instagram’s acquisition, other notable examples include WhatsApp’s acquisition by Facebook and LinkedIn’s acquisition by Microsoft, showcasing how well-structured exits lead to significant value realization.
- Preparation for Exit: Preparing for exit requires meticulous planning, encompassing financial, operational, legal, and strategic considerations, which necessitates engaging with legal and financial advisors to ensure a well-coordinated exit.
- Market Analysis: Understanding the market dynamics, including the demand for such businesses, competition, and economic conditions, is vital for determining the right time and method for exit.
This stage underscores the importance of foresight, strategic planning, and adept management in ensuring a smooth and profitable exit, which ultimately reflects the culmination of the entrepreneur’s efforts over the business lifecycle.
Entrepreneur Tips
Navigating through the Exit stage requires a blend of strategic foresight, meticulous planning, and effective execution. Here are five tips to assist entrepreneurs in traversing this crucial stage:
- Develop a Clear Exit Strategy Early On:
- Having a clear exit strategy from the outset or early on in the business lifecycle can help in aligning the business operations and growth strategies towards a defined exit goal. This includes deciding whether to sell, merge, or wind down the business.
- Engage Professional Advisors:
- Engage financial, legal, and business advisors who are proficient in mergers and acquisitions or business exits. Their expertise can be invaluable in navigating the complexities of the exit process, ensuring compliance, and maximizing the value derived from the exit.
- Maintain a Strong Operational Performance:
- A business that is performing well operationally will be more attractive to potential buyers or partners. Ensure that business systems are robust, finances are in good shape, and operational efficiencies are maximized to enhance the business valuation.
- Foster Innovation and Intrapreneurship:
- Continuously innovate and encourage intrapreneurship within the organization to maintain or improve market position, which in turn, can enhance the attractiveness and value of the business during the exit stage.
- Prepare Comprehensive Documentation:
- Ensure that all business records, financial statements, contracts, and other critical documents are accurate, up-to-date, and readily available. Comprehensive and well-organized documentation can expedite the due diligence process and instill confidence in potential buyers or partners.
By adhering to these tips, entrepreneurs can better prepare for and navigate through the Exit stage, ensuring a smoother transition and optimizing the outcomes of the exit process.
Further Reading
View the original paper here, and the blogs in this series:
9 Stages of Enterprise Creation: Stage 1 – Discovery
9 Stages of Enterprise Creation: Stage 2 – Modeling
9 Stages of Enterprise Creation: Stage 3 – Startup
9 Stages of Enterprise Creation: Stage 4 – Existence
9 Stages of Enterprise Creation: Stage 5 – Survival
9 Stages of Enterprise Creation: Stage 6 – Discovery
9 Stages of Enterprise Creation: Stage 7 – Adaptation
9 Stages of Enterprise Creation: Stage 8 – Independence
9 Stages of Enterprise Creation: Stage 9 – Exit
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