Create Good Exits
NACO Academy Module 108: Exit Strategies was created by Basil Peters, who wrote the book, Early Exits: Exit Strategies for Entrepreneurs and Angel Investors (But Maybe Not Venture Capitalists) . Peters also blogs about exits at www.exits.com/blog/. According to Peters, the optimum time to sell the business is often as soon as you prove the business model. Selling on the promise of future revenues, rather than actual revenues, will achieve a higher valuation. Unfortunately, most entrepreneurs wait too long and “ride it over the top.” They should exit in the 2–4-year time range but, instead, hold on too long until things start to go wrong, too many rounds of financing are raised, or new competition emerges and the window of opportunity closes. (See figure below from NACO Module 108.)
Don’t Ride It Over the Top
Optimum exit time IRR=124%
6
Optimum time to start the exit
5
More typical time to start the exit
4
More typical exit time IRR=15%
3
Fastest growth phase
2
1
0
0
1
2
3
4
5
6
7
Years From Investment
Source: NACO Academy Module 108 : Exit Strategies
Optimum Exits Are Surprisingly Rare The most important fact that I want you to take away from Module 108, one that I hope will change your life and enrich the shareholders of your company, is this: only 25% of saleable companies successfully exit. Yes, I’m saying that 75% of the time, when entrepreneurs and investors build a company that could have been sold – we blow it – and fail to successfully exit. — Basil Peters , CEO, Strategic Exits Corp
90 A Practical Guide to Angel Investing
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