All investors greatly desire and are motivated by a clear picture
of a company’s exit strategy, or the timing and method through 
which they can “cash in” on their investment. This picture best 
comes into focus when the key valuation and liquidity drivers 
of the company are clearly delineated. An excellent method to 
accomplish this is through descriptions of comparable firms that 
have had successful liquidity events, either through acquisition,
merger, of initial public offerings (IPOs).

It is helpful to show other companies in your market, or similar 
companies in other markets, who have successfully exited, and 
how and why these companies were successful. For instance, were 
they successful since they acquired a large customer base? Or 
were they successful since they accomplished fast growth or high 
profit margins? It is also important to tie their success to 
their exit price. Was the exit price based on earnings or the 
number of customers the firm had at the time? The business plan 
should tie these metrics (e.g., exit price of $X per customer) 
to the business to determine its future price.

The most common exit strategies in business plans are IPOs or 
acquisitions. While the method of exit is not always crucial, the
investor often wants to see the decision to better understand the
management team’s motivation and commitment to building long-term 
value. If acquisition is the selected exit path, then the 
business plan should detail potential companies that might want 
to acquire the firm in the future and why. Likewise, if an IPO 
is expected in the future, the business plan should document the 
financial metrics of the company that make it ripe for this type 
of exit.

In most cases, investors only make money when the business 
reaches a successful exit event. As such, it is critical that 
business plans explain the expected exit, detail why this exit 
was chosen and validate a realistic exit price. 

Growthink Business Plans 
has developed over 200 business plans for clients have 
collectively raised over $750 million in financing, launched 
numerous new product and service lines and gained competitive 
advantage and market share. For more information go to: 
http://www.growthink.com