Here Is Why You Need A Good Exit Strategy

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Article originally appears via www.gust.com. Author: Martin Zwilling.

If you startup is your dream, why would you want to think about an exit? It’s going to be so successful and so much fun that you don’t need to think about what comes after. Wrong. There are two very real and practical reasons why you need to plan an exit:

Outside investors want to collect their return. Remember that equity investments are not like loans with interest. The investor sees no return until he cashes out, or the company is sold. Even three years is a long time to wait for any pay check.
Entrepreneurs love the art of the start. Assuming your startup takes off, you will probably find that the fun is gone by the time you reach 50 employees, or a few million in revenue. The job changes from creating a “work of art” to operating a “cookie cutter.”

In three to five years, you will be anxious to start a new entity, with new ideas and spinoffs that have built up in your mind, and certainty that you can avoid all those potholes you hit the first time around. If your startup was less than a success, you’ll definitely want to erase it from memory.