- William Auwines
Exit Strategy: How to Do It?
Exit Strategy: How to Do It?
As an entrepreneur, you will be the one who develops your startup from the moment the business is born. Later, you will see how your startup will go in the future, whether it will grow bigger and bigger or has to experience a massive decline in business.
No matter what happens, you can't forever stay in every startup you create. There will be times when you have to leave the startup. You have to either increase your business ambitions and profits or survive the business losses you experience.
For you to exit your startup smoothly, you need a qualified and proper exit strategy. Want to know what an exit strategy is? Let's read this article further.
What is Exit Strategy?
The exit strategy is used by business owners and large investors in a company to release ownership of their business and transfer it to a third party. The transfer of ownership is usually done by selling the company to benefit the owner and investors.
Rational calculations carry out the exit strategy under two conditions. First, an exit strategy is carried out if owners and investors see the potential for large profits, both financially and non-financially, from the release of the company they own. Second, an exit strategy is carried out if the company suffers massive losses, and the only way to save its owner's failures is to give up the company's ownership.
What Is The Type of Exit Strategy?
There are several forms of exit strategies that can be done. However, the common exit strategies are as follows:
Merger and Acquisition
In this type, an entrepreneur sells the company to another company. Later, the buyer company will integrate its business into his company.
A typical form of Merger and Acquisition is the purchase of YouTube by Google and Instagram by Facebook (now Meta). In that purchase, Google and Meta integrated these social media services into their networks and tools.
Initial Public Offering (IPO)
In this type, entrepreneurs offer ownership of their company in the form of securities to the public on the stock exchange so that the company will turn into a public company. The profits from the IPO can increase the capital of the companies that offer it.
An example of an IPO as an exit strategy is the IPO carried out by Bukalapak and Go-To in 2021.
Unlike the previous two exit strategies, management buyout is an exit strategy when ownership of the company is handed over to the manager who controls the company's day-to-day affairs.
With this purchase, it is hoped that the company's operationalization can be adequately maintained after the previous owner handed over the company's ownership to the new one.
This exit strategy is similar to inheritance. The company owner handed over his company ownership to his family, whether it was children or relatives. This exit strategy will be very effective when the company's heir has the expertise that is relevant to the company's business sector.
This exit strategy is carried out to close the company by selling valuable assets belonging to the company. This strategy is the last resort for businesses that have suffered massive losses or when no party wants to continue the business.
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