One thing sometimes left out in business plan narratives is the exit strategy.  The plan looks very enticing, the numbers look good going forward.  There appears to be some nice growth in the valuation of the company.  Revenues are growing and ebitda is at a nice level.

That’s fine for the company, but what about the investor.  One of their primary questions is, “How will I get my money out?”  They want to make sure their getting into an investment that will have some liquidity at some point.  They’re not looking for money in that’s going to be around for several generations.

So check your plan out.  Does it have an exit strategy section?  If not, add one in.  It doesn’t have to be too long.  It may only be a couple paragraphs, but make sure you cover some of the bases in terms of what some of the alternatives might be.  Here are a few that you might consider:

1.  Acquisition by a strategic party.  A strategic party in your industry might be best able to judge the real value of your company as well as have additional opportunities to take advantage of what you offer through their company.

2.  Financial buyer.  Your business might grow to a stage where it’s going to be interesting enough for a financial buyer to step in, somebody who has enough financial resources to put further capital into the company and take it to an even higher level than you might be able to or you necessarily want to continue to do.

3.  Public offering.  While with regulations like Sarbanes-Oxley and the greater complication of being involved in a public market these days, this is becoming less of an option.  The threshold to become a public company is generally getting higher because of these ongoing costs.  However, it could be a good potential exit for the right situation.  If you’ve got a very strong business plan in an industry that can have some public market appeal, this could be a exit strategy to put down too.

Where should this go in the plan?  I usually like to see it fairly early in the plan, perhaps shortly after there’s a summary overview of the financial results or, perhaps, a summary snapshot of the uses of proceeds from the investment that is being sought with this business plan.  It can show the investor that you are thinking about their interest.  It can also show additional interest that there might be in your particular company.  For example, a client of mine recently did not have an exit strategy section in their business plan.  I had them put it in and I gave them an opportunity to comment on inquiries that they’ve had recently during the past year from some very interesting strategic buyers within their industry.

So make sure you have an exit strategy in your business plan.  Otherwise, a potential investor might just head for the exit before giving your company a thorough look.