Your Exit Strategy

By Garrett Shinn, CPA

Most privately held technology startups eventually result in either an initial public offering (IPO) or an acquisition. However, today’s changing market has made it less clear then ever when the management of a private firm should exit. The following three areas should be considered in order to put your organization in the best possible situation for an eventual exit:

1. Focus on Your Three Customers: Your three main customers are the people who buy your product or service, current investors, and future investors. In order to be successful, you will need to please all three of these groups. Pleasing future investors, in particular, will put your business in an ideal situation for when you wish to exit.

2. Treat Your Company Like an IPO: It is important to start treating your company like an IPO well before the IPO occurs. In doing so, you can ensure that the proper infrastructure is in place for a smooth transition. Public companies have specific reporting requirements that should be considered ahead of time.

3. Don’t Maximize Value: It may seem logical to try to get the highest valuation for your company, but this is a common mistake among owners. In the case of a market turn, your investors will no longer be happy. It is better to have a more conservative valuation that reflects the true value of your business.

By considering the above three areas, you will be better prepared for your eventual exit, whether through an initial public offering or an acquisition.