Digital Entrepreneurship: Why Every Business Needs an Exit Strategy

Digital Entrepreneurship: Why Every Business Needs an Exit Strategy

Being a digital entrepreneur can be quite lucrative, especially if you have some great ideas. But starting with an excellent idea and building your company from the ground up is just half the story. The end of your involvement in your digital business is inevitable, but the way you leave is what will ultimately dictate if you succeeded or failed.

Why You Should Have an Exit Strategy at the Onset

Even if you’re at the beginning stages of your next company or venture, you should include an exit strategy as part of your planning. Why does this matter if you haven’t even started the journey to profitability?

Your online business or digital venture is best thought of as an asset that currently or soon will contain your money. It’s an investment, not just an idea. Many digital entrepreneurs rely on their online businesses for their salaries and livelihoods. But most businesses don’t last forever, and the end of your involvement with the business can lead you to the biggest profits over its entire lifespan.

Therefore, having a solid exit strategy will allow you to recap the maximum benefits when it is inevitably time to move on. A good exit strategy will also allow you to determine the direction of the company and figure out how best to grow it for the maximum benefit for yourself. Failing to come up with an exit strategy before you develop a company or website may lead you to truncate your options when the time comes to leave.

An exit isn’t even really a failure. If you plan for it properly or incorporate it into your business plan, exiting your company can even be thought of like the natural progression of your story. Achieving all the goals you set out to accomplish with your company or website is part of successful exiting strategies. Plus, having an exit strategy baked into your business plan will make your business more attractive to possible investors.

All of these aspects are even more important for digital entrepreneurs. The e-commerce world is constantly shifting, and oftentimes much more quickly than businesses in the offline world.

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How does an Exit Strategy Help?

Exit strategies prevent you from scrambling at the final stages of your business’s lifespan or at the end of your leadership of the business. It prevents you from making last-minute decisions that could have negative side effects down the road and ensures that you’ll reap the maximum benefit from all your hard work once you sell the site or company.

Excellent exit strategies will boost the income you get from your leaving. Some of the most successful companies can net their founders or creators a tidy profit. In many cases, you’ll make enough to move on to your next business venture or even retire early, if that’s a goal you have in mind.

But that’s not all. Exit strategies can also make the transition of company or website leadership from you to another person or group easier for everyone. Having a strategy in place sometimes needs understanding what you intend to get out of the exit and what you want to pass on. These decisions being made beforehand is a lot cleaner than having to come up with your goals right at the end of your journey.

Similarly, exit strategies can reduce tax issues that might arise from sudden boosts to your income or changes in documentation. They can even let you make the most of tax codes if you have the expertise to navigate them deftly or hire a legal team to do so for you.

Finally, exit strategies can be invaluable if a big economic event happens or a personal disaster strikes your life at an inopportune moment. Exit strategies can let you dip out of your company and take it off your hands for as little loss as possible. The best exit strategies may even be able to prevent you from losing anything at all, even if a sudden event limits your profits.

Which Exit Strategy Should You Develop?

When developing your own exit strategy, it’s important to consider the main types of strategies that you can build toward.

Merging

Merging your company with another is one of the most common exit strategies in the business world, both offline and online. Combining your resources with another digital entrepreneur or business can let both companies grow in unexpected areas or to greater profits. Such profits can easily allow you to pay off your investors and still leave plenty left for your own profits at the end.

Acquisition

Similarly, you can try to get your digital business purchased by a larger company. Such an acquisition often comes with a large lump sum to yourself, which is helpful for paying off investors or any other debts you may have incurred during your growth of the business. Positive acquisitions can even let you continue to work with the company if you so choose, although you’ll have to take less responsibility (which may be a good thing!).

However, both of these strategies come with several side-effects. You’ll have to lay off some of your staff if you have people working under you. In addition, you’ll no longer be the one in charge. You might have a boss or be leaving the digital business entirely. In this case, the name, brand, and anything else associated with your website or digital business is no longer under your control. This can be difficult for many digital entrepreneurs to accept.

Making it Public

You can also develop your company for an exit strategy involving making it public. This involves building your business for maximum growth and sustainability and selling it to shareholders once it’s reached an appropriate measure of profit. However, this strategy requires a lot of legal expertise and business sense to pull off correctly. Without a formal education in this area or hiring people to think about it for you, we’d recommend that only experienced digital entrepreneurs pursue this option.

Still, going public with your company can lead to huge profits in the short or long term, depending on how much of a share you keep in the company. It’s possible to retain creative or executive control over the company if you retain most of the shares. But this truncates your short-term earnings and isn’t much of a “full” exit.

Sell

You can also sell your digital business to a single individual. This is often what happens with smaller digital businesses that are in niche subjects. This can be helpful if you want a short-term boost your income or want to move on to another digital venture. It’s much easier to do than the above two options, and you can involve website brokers to ensure that the transfer of ownership is as secure and profitable as possible.

This type of exit strategy often allows you to earn a good profit almost immediately once a website is ready for selling. But you usually aren’t able to keep any long-term revenue from the business, so you’ll likely need to begin developing your next venture immediately after selling.

Step Down

If you’re looking for a more relaxed exit strategy, you can always remove yourself. This is only really applicable to online businesses that have plenty of capable employees to take over once you let go of the reins. This strategy allows the company to theoretically continue operating as it always has while you take on less or no responsibilities.

You are often able to negotiate a cash settlement or annuity, depending on how your digital company is structured. You may still owe money to investors, and you’ll have to navigate any internal politics concerning your successor and stakeholder confidence in that successor. Still, this can be an attractive choice for those invested in their digital company’s future but who don’t want to be in charge any longer.

Shut Down

Finally, you may need to develop a more drastic exit strategy if your business doesn’t do quite as well as you had hoped. You can always liquidate your business and shut the company down before moving on to your next venture. This sounds like a failure, but it can actually be a smart way to recoup costs and help you pay off investors before moving on to your next idea.

This exit strategy is best as a backup plan.

Landocs Private Equity (Landocs PE)

There’s also Landocs PE. As qualified digital business improvement specialists, they’re always on the lookout for profitable online businesses and websites to purchase. Their experienced team of digital gurus and financial experts know exactly what to look for in a business worth their purchase. They’re a great team to go to if you need a qualified, cash-ready buyer.

In addition, they aren’t simple domain flippers. You can rest assured that your online business or website will grow and improve under their care before moving on. It’s a great balance between selling your business and stepping down to hand it over to someone trustworthy. Contact them today if such an exit strategy sounds appealing to your business sensibilities.

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