Consider your exit strategy when starting up
Exit option: float your business
Floating your business - selling shares on the stock market - can be highly rewarding financially. It lets you realise your investment in the business by making it easier to sell part of or your entire stake in the business.
But any financial exit from the business is likely to be partial. Potential investors will be wary if you sell all your shares - and you may not be permitted to do so.
Any float will also affect other existing shareholders or investors. The shareholders agreement may give existing shareholders pre-exemption or voting rights which may make a float more difficult or reduce the amount you can realise.
Relatively few businesses can realistically expect to float as they are unlikely to be able to finance the necessary growth to attract investors.
Venture capital investment
The most likely source of funding for high-growth businesses is venture capital investment. However, it is important to check exactly what return a venture capital firm is expecting on its investment. See our guide on equity finance.
Once you have secured funding you'll need to build a record over a number of years of delivering strong earnings and profits - and develop a business plan showing how you'll achieve further rapid growth.
Business suitability
Steps to take to be a suitable business for a flotation or venture capital investment include:
- building a strong management team
- setting up a limited company
- developing operational, financial and management systems robust enough to handle both rapid growth and the additional legal requirements of a listed business
- appointing high-quality financial advisers
Because flotations are unsuitable for most businesses, it is important to consider other exit options - a trade sale could be a better alternative. For more information on trade sales, see the page in this guide on the exit option: selling your business.
For further information on floating your company, see our guide on floating on a stock market: your options.
Subjects covered in this guide
- Introduction
- Why you need an exit strategy
- What do you want from your business?
- Decisions that could affect your eventual exit
- Exit option: family succession
- Exit option: selling your business
- Exit option: float your business
- Exit option: close your business
- The exit process
- Here's how I planned an exit strategy
