Preparing for Investor Funding: Know Your Exit Strategy

Preparing for Investor Funding: Know Your Exit Strategy

Elizabeth, a toddler mom, dreamed of creating a beautiful play mat to replace the circus-colored foam covering her entire living room floor. All her mom friend’s thought it was a genius idea. But, when Elizabeth set out to bring it to life, she didn’t know where to start. She had several questions. The biggest being, “How much funding do I need to get started, and where do I get it?” With no background in finance, she knew she’d need expertise beyond a free Google search. So, Elizabeth reached out to an advisor. Together, they developed a strategy with the end in mind. A route she probably wouldn’t have gone on her own. Thankfully she did because when given the opportunity to pitch her idea to top investors on ABC’s Shark Tank, she wowed them and her dream came true.

Get What You’re Worth

If you’re a business owner seeking investor funding, here’s what you need to know, first.

Begin with the end in mind!

Many people skip this crucial step and end up leaving a lot of money on the table. Don’t let that happen to you. Instead, do the grunt work first. Collaborate with a financial expert to determine your dream exit. By starting here, you define your actual worth and the steps needed to get there. That way, when it comes time to pitch your idea, you’ll have thought-out the entire process from start to finish.

How to Create Your Dream Ending

First of all, everyone has a dream ending. Maybe yours is to grow a company that lets you retire on a beach in the Bahamas. Or, perhaps, you’re a brilliant techie waiting for an IPO that’ll give you financial freedom at an early age.

Whatever your dream, know it’s possible with the right steps. Work with a financial professional to answer these three questions before approaching an investor:

1. What is my exit strategy? There are eight options for exiting a business. For instance, you can transfer it to a family member, sell to a key employee, engage in an IPO, or cultivate a third-party-buyout. Thus, know your options and map out a realistic plan so investors can see where you're going.

2. What intermediate investments will be required to get me there? A professional valuation of your business will be critical to your success. Hire an analyst to review your financials, compare similar companies, and identify forward moving metrics. You'll want to know this information because they add value to your business and appeal to investors.

3. What steps should I take NOW to achieve an exit in xx years? The overall value of your business is a critical component to the timing of your departure. And your worth will far exceed your financials. Investors take into consideration additional things like relationships, employees, values, and environment. Creating a healthy culture now will get you the results you desire later.

Understanding the significance of these questions can be overwhelming. So, make sure you work with an expert to get an exact analysis of your company. Together, you’ll be able to bridge your dreams with real-world realities.

In Conclusion

When it comes time to pitch your grand idea, enter the arena with facts, not fear. Do this with the end in mind. Ask yourself, “Where do I want to go?” “How will I get there?” Then work with an expert to map out your exit strategy. An overall assessment of your business will prepare you for investor funding and give you the confidence needed to answer their questions.

Now, get to work, and watch your dream come true!

Want to learn more about investor funding? I can help. With more than a decade of experience, I provide worry-free financial and operational services to entrepreneurs and small business.

Join me November 10 and 11 for my Founder Financial Boot Camp where I take entrepreneurs from zero to pitch-ready in 2 days. Learn more and register here.



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