Founding and growing a start-up is like raising a child. You’ve put in all the work and effort and experienced highs and lows, but now it’s time to move on. Whether you are planning on selling your start-up, want to move to a board member position, or need to make the difficult decision to liquidate, it’s important to have a plan. Knowing your options when it comes to exit strategies can help you make an informed decision that’s right for you and your company.

Having an attorney explain your exit strategy options can ensure that you understand the pros and cons of each possibility and what legal implications they may carry. Call InPrime Legal if it’s time to make a change and you’re looking for legal counsel to help you through the start-up exit process.

Why Is It Important to Have an Exit Strategy?

It’s common for founders of start-ups to enjoy the high-risk, high-reward aspect of creating a new business. Having to build a product, service, and company from scratch takes a special set of skills, and it’s a challenge many entrepreneurs relish. But they may become bored or feel like they’re not being challenged once this phase is over. Having an exit strategy from the beginning ensures the business doesn’t suffer as the founders move on.

Exit strategies can also be important for attracting investors who want to make sure that they will continue to get a return on their investments even if the founder is no longer involved. Successful exit planning ensures that the business decisions made at the beginning of the company and onward are focused on ensuring the best financial outcome for the business and those who helped create it.

What Are Some Potential Exit Strategies?

No two start-ups are alike, and it’s important to choose an exit strategy that aligns with your company’s needs and your goals as a founder. Here are some potential options to choose from:

  • Acquisition: Selling the start-up to another company
  • Initial Public Offering (IPO): Listing the company on the stock exchange to bring in capital from more investors
  • Liquidation: Dissolving the business and selling off assets
  • Management buyout: A group of employees, often management, buying out a founder
  • Secondary market sale: Selling the founder’s shares of the business to other stakeholders

Each of these options has its own procedures and specific rules and regulations for how it must be executed. Speak with an attorney about your options and to help you choose the right one for your business.

When Should You Start Planning Your Exit Strategy?

The simple answer: much sooner than you probably thought. Exit strategies are complex, and it can take time to get the business and employees ready. If you’re planning to sell, you’ll need time to get the business records prepared for a sale, find a buyer, and execute the transaction. Even if you’re just planning on liquidating because the business isn’t viable, it’s not a fast process. In general, you should start planning your exit strategy 5 years before you actually want to leave. This ensures there’s time to build the business up and prepare it for your exit.

However, this is just a guideline, and the exact amount of time it takes to plan an exit strategy differs depending on the size of the start-up, the industry, and your post-exit plans. If you haven’t started exit planning yet, it’s a good idea to meet with an attorney and start discussing your goals — even if you plan to stay with the business for several more years. The sooner you begin the conversation, the more time you’ll have to plan a smooth exit.

If you need a lawyer who is familiar with how start-ups work, Georgia business law, and exit strategies, InPrime Legal can help. Reach out to our team by calling our Marietta office at 770-282-8967. Schedule an appointment with one of our attorneys who can go over where your business is at, what your goals are, and how you can start to make the transition away from this start-up and on to your next adventure.