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Pete - 15 / 05 / 2024
Pete - 15 / 05 / 2024

How Strategic Exit Planning Can Help You Achieve 10x Growth

By Guy Remond with Charlotte Ashton

Exit planning. 

Startups need it. Some investors want to see it. However, according to research from wealth manager Charles Stanley, almost half (48 per cent) of business owners don’t have an exit plan in place. 

As an entrepreneur, I’m aware that the sheer number of myths and biases about exit planning has almost made it a taboo topic in the startup community. That’s why, on the most recent episode of Fast Growth Funding, I sat down with Charlotte Ashton, Founder of Implicit, to discuss the importance of exit planning.

Charlotte works with early-stage founders, supporting them to facilitate an exit from day one. In this blog, we’ll explore some of her insights into building an exit plan – not just for founders but also from an investor’s perspective.

Why do entrepreneurs neglect their exit strategy?

Most entrepreneurs who don’t have an exit plan neglect it for one of four reasons:

  • Lack of knowledge about exit planning.
  • Too many things on their plate.
  • The assumption that they’ll have ample time for exit planning once their business is successful.
  • They underestimate the time required to achieve their financial goals.

However, there’s something to be said about being prepared from day one. In my previous company, I was one of those founders who didn’t think much of exit planning. When I met Charlotte at an event, I realised I had to backpedal. 

Although my company was ready from a personnel and experience point of view, we were definitely not ready for exit. So, we had to start lining up our ducks and getting everything in place. 

There are two major benefits to founders doing this. The first is that it’s generally good practice that will help them run their businesses more professionally from the get-go. The second benefit for founders is that if they understand where and when their exit is likely to be, their strategy will be aimed at achieving that goal. 

From an investor’s perspective, being aware of a startup’s exit plan simply means that you can better align your resources, such as capital injection, network support, and strategic guidance, to steer the company towards that exit. This ensures that all parties – founders, management, and investors – are working cohesively towards a common end goal.

Charlotte also shared some insights into the benefits of founders planning their exit from day one:

What’s confidence got to do with it?

Charlotte: “Having an exit plan helps founders build confidence when they’re raising money. Every investor wants to know when they’ll be able to get their money back. As a result, most focus on exit and whether they think the growth of the business will yield the level of return that they need. 

So, if you’re talking to a founder who has already considered exit and has an idea of the North Star that they need to be focused on, that builds a huge amount of credibility and instils confidence in the investor.”

Going back to my initial point that an exit plan helps founders make more strategic decisions, it also provides insights that will ultimately set everyone on the path to fast growth.

Charlotte: “When it comes to driving or informing an exit strategy, founders should usually look at comparable benchmarks at any stage. If you’re a founder, you want to look out for other comparisons of innovation. Essentially, what you might be saying is, ‘It’s typical for businesses on this trajectory to exit through IPO or via a large corporate exit. ‘ 

At the very least, you’ll have some market data and a few examples of businesses that have successfully followed that route. This gives an indication of the strategic value drivers that attracted investors/buyers to acquire that business. Then, you can use that data to get a better idea of how you can integrate some of those financial and strategic value drivers into your own strategy.”

From an investor’s perspective, you’ll be better equipped to conduct thorough due diligence and make more informed investment decisions. Exit planning – along with these comparable benchmarks – allows investors to assess the business model, growth potential, and potential exit options. You’ll then be able to assess the alignment between your investment objectives and the company’s trajectory.

How does EHE help founders with their exit planning?

We’re entrepreneurs helping entrepreneurs, which means we have a great network of professionals with whom we work. In our experience, every entrepreneur has different skills and needs different levels of support. So, part of our job involves identifying the areas that they lack experience and knowledge in and bringing people in to support them. 

I always advise founders to have someone like Charlotte or a non-exec around. They point you in the right direction and provide you with clarity because, ultimately, you don’t know what you don’t know! 

Final thoughts

In a nutshell, exit planning is essential for both founders and investors because it helps founders run their businesses with a clear, strategic end goal in sight and helps investors protect their investments. 

For founders, having experts like Charlotte involved from the start ensures the roadmap is not only clear but also actionable and aligned with investor expectations. Ultimately, it positions the startup for success and ensures all efforts are geared towards achieving a rewarding exit.

From an investor’s perspective, an effective exit plan provides you with a clear understanding of the startup’s goals, strategies, and potential exit scenarios. This allows you to make informed decisions about your investment and track the company’s progress.

If you’d like to find out more about how EHE Ventures supports founders and investors on the path to fast growth, check out our success stories. 

If you’d also like to join our funding revolution and take advantage of disruptive, AI-driven opportunities, register your interest here

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