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The Exit Strategy In Your Business Plan
Most equity investors especially venture capitalists want the money they have invested back at some point in time. This is usually 3 to 5 years after you company gets its initial funding. That means your company has to generate cash returns for the original investment plus the large profit they hope for.
This can be done in two ways, an initial public offering (IPO) or the acquisition of your company by another, usually larger company.
What exit strategy your company pursues will depend on a lot of things, but a major influence will be the economic climate at the time the exit strategy takes place. Sometimes the economic climate favors an IPO other times it favors acquisition as an exit strategy.
Since you can't predict the economic future the best thing you can say about your exit strategy is that your company will go public or be acquired depending on the economic climate. That covers the two alternatives that are available and shows the investor that you understand how things work.
The need for an exit strategy applies primarily to companies that are funded by venture capital. Companies funded in other ways can remain private for long periods of time assuming it makes economic sense and their management favors that strategy. They have no imperative to have an exit strategy.