PATHS FRAMEWORK
The Strategy Exit Phase
When is the Right Time to Exit a Business? Updating Your Preparations
You’ll know by now that planning for the strategy exit phase begins when you’re still considering the acquisition.
But plans may need to be adjusted. Unexpected obstacles and opportunities may both arise. Here’s how to navigate them.
How to Make a Strategic Exit
The best exits leave an acquired business in better health than you found it in, and the valuation correspondingly higher.
There’s never a guarantee, but if all your efforts have been directed toward this goal from the start, there’s every chance you’ll make a successful exit.
Plotting the Timescale of an Exit
You should have an evidence-based estimate of the best time to exit the business before you acquire it. This is a critical part of setting realistic growth goals. You should also be ready to adapt this estimate based on current evidence. If you identify a huge growth opportunity over the next 2 years, why sell now? Likewise, you’ll need to adjust for unforeseen setbacks. If your acquired business hasn’t met its desired valuation yet (but you know how it could), it may be worth pressing on before exiting.
Conditions for a Successful Exit
Identifying the requirements for the acquired business to remain sustainable after you leave is essential. Without this, you’ll struggle to find a buyer. Always assume that your buyers will be as rigorous with their due diligence as you are – an amateur mistake is trying to exit an unsustainable business while it’s at a high. 99% of the time, the buyer is wise to these tactics.
Why Not All Exits Are Successful
Lack of prior research is a leading cause of undesirable exits. Inflexibility is another. Almost every experienced M&A professional has made an acquisition that didn’t go to plan. While every effort should be made to turn a struggling acquired business around to help your exit, there may come a time when you need to cut your losses. Don’t expect a 100% success rate. Instead, consistently plan for your next acquisition to go better than the last.
Analyzing a Good Exit
There are lessons to be learned even from the most successful exits. What made it work? What did you do that you hadn’t done before? If your first acquisition and exit is a success story, congratulations! Now you should immediately start analyzing everything that enabled this. You must have done a lot of things right, but if you don’t know what those things are, there’s every chance that your next venture will fall victim to hubris.
Lessons Learned – and More to Learn
There are always lessons to be learned. This is where we gather those lessons, so a community of entrepreneurs can benefit from shared knowledge and experience.
The PATHS framework is informed by profound industry experience, professional analysis, and the dedication of an expert community.
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