Exit Strategy – What is an exit strategy?

what is an exit strategy I got a great
question from one of my newsletter
readers Marquez who wrote in to say he’s
starting a car rental business and he
wants to take on investors and wants to
figure out what the exit strategy is
gonna be in four to five years so
Marquez there are three ways to exit a
business and it’s a great way to think
about what the exits gonna be before you
bring on investors so you can set up
expectations it may not work out exactly
that way but if people come in with
different expectations then you’re not
setting yourself up for success and
bringing on a partner really is like
getting married you have to make sure
you both in it for the right reasons
that you love each other because if
you’re in it for different reasons if
you’re not super clear and communicating
properly it’s not gonna work out and you
do not want an investor in your business
who’s not fully on board with the
company it’s only gonna cause problems
for you and may sink your company
because you’re stuck with them forever
some terms of an exit how do we get out
of this how do we sell our business or
how do we get rid of shareholders three
main ways to do it okay the first is
managing bio so management bio is where
you buy back the shares from the
investor so this could be something that
you prearranged
in advance you know in three years I’m
gonna buy back my shares at this amount
or five years or whatever it is so your
your the company is buying out the
investor at a profitable return for them
the second one is acquisition so you are
acquired by a bigger business who pays
you money and buys out everybody and the
third way to exit is by going public
this is the least common way to exit a
business is you go public so you have a
stock on the public market and investors
buy some of your shares and you’re able
to cash out so those are the three main
ways I would again strongly urge you to
think about who you bring on board and
if they’re bringing more to the table
than just money
I remember with my first business the
software company and and we got it to a
point we’re having some success and felt
like we needed either an investor
or some guidance to help us get it to
the next step and we had a guy who
helped us we met with who talked the
talk talked a big talk at a great
downtown office and wanted to be a
partner in the business and something
just felt wrong with it and ended up not
working out with him and we felt regret
you know we felt this might have been
our shot but it just didn’t feel right
he just didn’t fit the culture of the
business and again if you get stuck with
the wrong partner wrong investor it will
sink your company because they’re
they’re super hard to get rid of new
investors don’t want to come in to buy
out existing investors when I was in the
VC business and we got pitched plans and
people wanted to raise dollars to buy
out their angel investors nobody wants
to do that so you’re stuck with this
person and so I remember it was such a
hard decision to say no to this person
to end that relationship because we saw
a potential with them but we didn’t want
to give up equity it wasn’t us being
greedy it just wasn’t the right fit for
our business so trying to get caught up
in the excitement I know you need money
and it was hard for us hey I’m making
300 bucks a month it’s hard to say no
but it’s got to feel right because this
is an important decision it’s too
important to bring on the wrong person
so hopefully that helps believe for
those of you watching you liked the
video please give it a thumbs up and I
want to hear from you do you have
questions about raising capital about
how to exit your business leave it below
and I will do a video response thank you
so much and I’ll see you soon
you