What is an Exit Strategy?

 

 

Exit strategy could also be called as an emergency plan. This could be implemented by an investor, trader, venture capitalists or owner of a business.

Case breakdown: Movie The Man with the Golden Gun:

The scene that you just saw is from a Bond movie called ‘The man with the Golden Gun”. If you watch this scene carefully, you will understand that when Bond is confronted by a weak opponent, he’s feeling smug, as soon as he faces an opponent who is much more skilled at Karate than he is. Bond starts planning his exit strategy.

In the video at time 01:10, you can literally see Bond grabbing his opponent’s neck but planning his exit strategy while looking at a window. Though one cannot see the window in the movie frame yet. In another 15 seconds he jumps out the window.

Understanding Exit Strategy:

Similar to this is an exit strategy for a business that isn’t performing. When business’s do not perform or are not able to sustain in the market, they need to think of an exit strategy. Angel Investors also sometimes take the route of exiting the company through an IPO.

Sometimes market forces businesses to look for an exit strategy such as COVID. Many businesses’ had to think on their feet or innovate or find an exit strategy during the COVID times. For example: Many dating sites had to shut down their services during this time as they were not earning any revenue during lockdown situation.

Some business strategies include initial public offerings (IPOs), acquisitions, buy-outs or declaring bankruptcy as well. Business owner forms a strategy and sometimes it can be as simple as looking for a window (similar to James Bond) of opportunity. While, other times it maybe a challenging situation. An entrepreneur can limit his losses if he/she chooses to exit the business.

Many business owners carve out a detailed exit strategy. These owners are aware of their cash flows and have a forecast to know what will happen when the cash flow falls below a certain limit. What steps would they take, when no more capital infusion is possible.

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