Question

Mention and explain the “Four Basic Possibilities For Exit Strategy Options”

Answer 1

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Introduction:- A exit strategy is a transitional plan to another business and/or investors for the ownership of a company. This transition will include various means to dispose of the business either by selling the company to a strategic acquisitor or by launching an initial public offer (IPO) into the public sector or by selling it to the managing team. With constantly changing business and market conditions, preparing transition and generating value are more important than ever.Choosing the best plan means knowing the range of options available and evaluating them according to company goals. Essentially, many businesses with an exit strategy are structured to protect the value of the business they have developed and to return their investment to its maximum value. But there are other reasons why an exit strategy is needed.

There are many possibilities for exit strategy. However, as per your question I have mentioned below only four possibilities.

1. Economic Recession:- Significant and consecutive quarters of negative domestic gross product growth and several-month reductions in economic activities can have a negative impact on business activities. A good exit strategy can help the owners of a company to avoid the effects. The most successful exit strategies are generally those scheduled years ago. Companies often use one or two major factors such as income, customer experience, supply chain and business. Any business with growth prospects needs a good exit strategy.

2. Proper Valuation Estimates:- The company starts with the evaluation of potential buyers and the value for these buyers. The company also assesses its strengths and weaknesses in order to determine what areas should be improved to attract potential purchasers. This process goes far in measuring the value of the company, and the company will maximize the likelihood of success by designing measures to increase the overall value of the company by means of a good exit strategy.

3. Good Planning:- A company will also have a clearly defined goal by having a well-defined exit strategy. The exit strategy can be described as the company's highest goal and clearly articulating the outcomes it wishes to achieve; the organization can then create the requisite strategies for achieving the goal. The exit strategy can be incorporated into the vision and the mission statements of the organization and will be crucial to deciding the company's strategic direction. It can help business leaders to shape the business into the ideal form for choosing the exit option of the enterprise and thus optimize its value.

4. Health and Family Crisis:- The business owners may sometimes be affected by unexpected, unpredictable diseases. The holders of the business may also experience problems such as divorce or the sudden death of the parents. Such challenges may take time to focus on running a company efficiently. An exit strategy to take care of these events can help a business not to go underground, despite the problems of the owners.