venture capitalists | Bigg Success

Most entrepreneurs don’t have an exit plan. Most advisors and academics says they need one.

A growing chorus is singing the song of the entrepreneurs. We think they’re out of tune.

Bankers have at least two ways to get their money back or they won’t loan you money. Venture capitalists have an expectation of how they will get out before they get in.

As an entrepreneur, you have a greater stake than anybody else in your business, no matter how much money they tie up in it. You need to know how you might exit even if you don’t plan to exit.

It’s about liquidity.

At some point in your life, cash may be a more valuable Asset than a business. With every other Asset, we invest cash thinking it will turn back into cash someday. Why should our businesses be any different?

It’s about legacy.

Exit planning is continuity insurance. You’ve put your heart and soul into your business. Do you want to risk that it falls apart if you’re not able to be there for one reason or another? Of course not.

Most importantly, it’s about options.

If you plan on an exit and run your business accordingly, you’ll have the ability to walk out completely or at least step away and create some distance. At some point in your life, you may find more enjoyment from activities that don’t involve building a business.

It doesn’t mean you ever have to retire. It doesn’t mean you ever have to sell out. It does mean you’ll be able to live your whole life on your own terms.

Do you need help planning your exit? Maybe we can help. E-mail us at bigginfo@biggsuccess.com or leave a voice mail at 888.455.2444.

Image in this post from svilen001

exit The final chord was sung. The noise from the crowd became a roar. The lights came on. But there was still hope … still a chance that he might appear again. And then there was the voice, saying …

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Elvis has left the building.

You’re probably familiar with those famous words. It made us think:

Elvis always knew how he was leaving the building. If he was an entrepreneur, he would surely know how he was leaving the business.

Learning from the pros

Bankers and venture capitalists know at least two ways that they’re going to get their money back (plus the return they need) before they invest in our business. Shouldn’t we know at least one? It’s one of the lessons we can learn from these professionals.

Why you should know how you’ll exit

In 7 Habits of Highly Effective People, Stephen Covey taught us to begin with the end in mind. We should know how we’re getting out of our business before we get into it.

Know your exit. Elvis did. Professional investors do. Yet many entrepreneurs never think about it.

That may be a reason why studies show that a majority of entrepreneurs don’t expect their business to kick in any money for their retirement.

It’s crucial to consider your exit because small businesses are highly illiquid by nature. Unlike shares in a public company, there is no marketplace where you can go to sell it immediately.

Another reason to know your exit – perhaps a more important reason – is that it your exit should be one of the drivers of your business strategy. How you plan to get out affects everything from how you structure your business, where you get money from as well as a number of other things.

3 common exit strategies

Sell your business outright
Just like selling a house or any other asset, you exit the business by giving up any claims to ownership in exchange for an agreed-upon price. On your way out, just say, “Thank you … thank you very much!”

Redirect cash flows
Let’s say you invest $25,000 to start a business. Let’s also assume that you make $25,000 after-taxes in your first year in business (after fully compensating yourself for your time).

Further, let’s stipulate that you don’t need that money for your existing business. Take that $25,000 out and invest it somewhere else.

You invested $25,000 and you took out $25,000. Essentially, you have no money invested in the business. Yet you still own the business! Get your money out and say, “Thank you … thank you very much!”

Recapitalize
You still own the business with this strategy as well. Let’s say that you invested $25,000 to start your business. You got your business started, built it up and are making money.

You may be able to go to your banker and borrow against your business. Let’s say your banker agrees to a $25,000 loan which you can pay back from the cash flows of your business.

It’s likely that you’ll need a good use for the money to get your banker’s okay. For example, maybe you have an opportunity to buy a piece of real estate that will house your company.

In essence, you’ve cashed out of your business because you now have that original $25,000 invested somewhere else. Repeat this strategy over and over until you have enough money to fund the life of your dreams. That’s bigg success!

Thank you … thank you very much for reading our post today.

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