The Best Way to Think About Entrance and Exit Strategies

When I got my first job out of college, a well respected mentor told me to be thinking about my second job the first day I showed up at work for my first job.

This didn’t mean I shouldn’t do the best I possibly could at my first job but that I should have a plan, a projected trajectory and a strategy to put in place that would help me garner experience to make that next step.

This scenario is similar to the thinking that should go into small business ventures where the procurement of outside funding or start-up and venture capital is desired or needed.

Think about the next step.

For instance, some entrepreneurs really have a dream to change the world, while others are starry-eyed and see dollar signs in sea of opportunity during a boom or a gold rush. Still others are calculatingly cold as in: first year get the funding, second year grow the business, third year get profitable, get out.

Thinking two and three steps ahead is crucial. If you want to make your business your life’s work, then the mentality is different than that of a serial entrepreneur more interested in ongoing innovation and flipping ideas than pulling all-nighters for years at a time and eating, living and breathing your business until an exit strategy presents itself.

Either way, it’s important to think about the exit before the entrance or upon and work that into the plan. Venture Capital advisers, funding organizations and firms have been known to ask entrepreneurs what the exit strategy is so you should know it.

Would you like to grow and be bought or would you like to grow to put yourself in a position to buy? Would you like to procure venture capital funding until your group becomes viable enough for an IPO or are you open to the world of small-cap and private M&A?

Mergers & Acquisitions (M&A), which this blog will touch on continually in the future, is one of the most viable exit and/or expansion options for start-ups.

As a start-up hopefully you are on the seller end of an acquisition. According to VentureSource in 2009, venture capital-backed companies raised a median $18 million in VC funding before entering into M&A deals.

Moreover, VentureSource says that the $7.3 billion generated by mergers and acquisitions (M&As) in the fourth quarter of 2009 is up 49% increase from the $4.9 billion raised in the same period in 2008.

Who said there isn’t buying and selling going on in a recession?

Think about it and make the next step.

About the Author
Jabulani Leffall, 33, is an award-winning journalist and writer who attended Journalism School at the University of Missouri. His work has appeared in the Financial Times of London, Dow Jones Marketwatch, The Baltimore Sun, Investor's Business Daily, Variety, CFO Magazine, Compliance Week, Redmond Magazine, Black Enterprise, the Los Angeles Business Journal and the Los Angeles Daily News among other publications. He has been a George Washington Williams Fellow for the Independent Press Association where from 2002 to 2004 he studied the effects of subprime lending on poor communities. After what happened in 2007 and 2008, he feels vindicated as a journalist for having called what was going to happen. What else? Yeah, he also contributed vital research to the 1998 book University of Missouri History Professor Robert E. Weems, which is titled "Desegregating the Dollar." Additionally, he has appeared numerous times on ABC World News and CNN as a commentator of business and world affairs, again pretending to know what the heck he is talking about. Mr. Leffall is currently a the Associate Editor of Special Projects and content with FactSet Research Systems News and Media Relations Group. Lastly for the part where Mr. Leffall lives, he resides in a four cornered room where he stares at candles and his mind plays tricks on him. Read his articles and blogs please lest he go completely mad.
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