This post is part of a series called “Starting a Small Business,” where we look at the steps to start a business and make it big.
Now, after coming up with an idea, planning, marketing, increasing profits, and finding investors, you are an entrepreneurial expert. You are a hot shot success. It is time to do what every entrepreneur dreams of: get filthy rich. From there, it is up to you whether you want to stay with the company, retire, or start a new venture. There are a few standard methods for the exit, which are outlined below.
IPO – If I ever start a company and take it to this level, I dream of the IPO exit. An IPO, or initial public offering, means you are going to sell stock to the public. When a company goes public, it falls under the regulatory umbrella of the SEC and has to follow Sarbanes-Oxley accounting rules. However, your ownership in the company becomes a public commodity and you can become Bill Gates rich, where you hold your stock as an asset, or sell out for millions, or maybe billions. You may also be paid big fees, as was the case with the recent IPO of Tesla Motors.
Sell Out – If your company provides something that may augment the offerings of other, larger companies in a related industry, they might want to buy you. Google and Oracle are notorious for buying other companies to gain their employees and expertise. Other times, like the recent Mint.com purchase, give a company a major product that it can use to supplement current offerings.
Private Equity Sale – Sometimes, a private equity firm will want a piece of the action. These firms operate like venture capital firms, but with different goals. Private equity firms usually purchase a company in a friendly transaction with the intent to increase efficiencies, free cash flow, and profits with the ultimate goal of an IPO or sale as defined above. This is a great option if you want to cash out but stay with the company for a while longer.
Partner Buyout – If you have partners in your venture, you can sell your stake if they want to keep the business and don't mind running it on their own.
Remember that an exit is permanent. Once you have sold out, you are no longer in control. If you stay at the company, your investors are now your boss. They will demand a return on their invested capital, and you will have to either give it to them or will be removed by the board of directors.
The best part about this, however, is that you are likely free. If you have been bitten by the entrepreneurship bug, you will probably take a break and then start again. If not, it is time for you to take it easy.
I hope you have enjoyed this series of posts on starting a small business. Of course, this is just scratching the surface of the intricacies and demands of the responsibilities, perks, downfalls, and pleasures of becoming your own boss. Each business model is very different, and only you can make it fail or succeed. 90% of new start-ups fail, but small businesses are a cornerstone the economy.
Keep me updated if you give it a go. Let me know if I can help or offer you more resources for starting you business. And, most important, good luck!
Please read all of the posts in the series: