We all might think that if the business start-up was the dream then why should one even think of its exit? Why not about its ultimate prosperity and success? Likewise, discussing the exit of Energy Fizz seems to be unreasoned, especially when it is tremendously progressing and the industry is also booming consistently. However, an exit strategy is a part of a successful business planning, as well as, there are three most significant reasons for which every business has to develop its business exit plan. One of this reason is associated with the outside investors of the business who want to accumulate ad receive their investment returns. Another reason is that the investors only love the art of start-up, which means that as the time passes, they want to put their money in new ideas that they find more profitable with the change in trends. The last reason is that an exit strategy facilitates an entrepreneur/business owner to eliminate or reduce his stake in business in a way that if the business is successful, it makes a profit and if it fails, the exit strategy allows to limit the loss by ensuring a timely departure.
This shows that no matter how successful is Energy Fizz today, there will be a time when it does not want to continue its operations or may get forced to do so due to the dynamic market, economic, social, or political conditions. And whenever this occurs, Energy Fizz will be needing an appropriate way to wind up its business in the most efficient and profitable way possible (Burgelman, 2014). In order to do so, Energy Fizz may choose from a number of Exit Strategies that are commonly implemented by business organizations.
Energy Fizz Business Exit Plan
Energy Fizz needs an exit strategy if it ever plans to sell its business, transfer its ownership, seek for retirement, or unfortunately encounter a forced exit such as in conditions of bankruptcy or natural calamity. Exit strategy is a huge undertaking, which has significant implications on business structure, employees, and assets. There are five types of business exit strategies from which Energy Fizz may choose from. These include IPO (Initial Public Offering), Friendly Sale, Mergers & Acquisitions, Cash Cow Investments/Lifestyle Business, Management Buyout, and Liquidate/Shutdown. However, choosing a strategy is the last step in business strategy planning because before this lies a complete set of actions that will be followed in order to ensure that Energy Fizz will make the right choice (Moses, 2013).
Deciding over What Future Business Role is Desired: After deciding over that Energy Fizz does not want to continue, the first and the foremost things to evaluate is the role Energy Fizz wants to assume in future. For instance, if Energy Fizz would need no role, then management IPO would be the best option. However, if it will need to maintain some of its strategic roles then in such a case, mergers and acquisitions are the most suitable option as it facilitate the corporate allies to continue the operations and its productive outcomes (Burgelman, 2014).
Evaluating the Liquidity Requirements: Next, the Energy Fizz will identify its liquidity requirement because every exit strategy offers varying level of liquidity offers. For instance, mergers and acquisition may result in an instant increase of liquidity; however, in the case of IPO, Energy Fizz’s shares could be subjected to share lock-up agreement and under such condition, Energy Fizz would be unable to sell its shares even after its IPO. Therefore, before deciding on the exit strategy, Energy Fizz would gauge its liquidity needs.
Considering the Future Business Potential: It is also fundamental to identify that when you actually want to exit. For this, you need to identify the future business potential of your business. It is necessary to identify the future growth level because this will help to decide the exact exit point. For instance, the industry is new and booming currently and shows higher prospects of business growth and profitability. This means that this is not the high time for Energy Fizz to exit (Mohandas, 2012).
Evaluating the Market Conditions: While deciding over the exit, Energy Fizz will also evaluate the market situation and competition, as well as, the demand for its products as compared to its rivals. Once all these processes get completed, Energy Fizz will choose one of the following strategies to exit the market depending on the outcomes of all the above-mentioned assessments (Inc, 2016).
Strategic Options for Energy Fizz for Business Exit
IPO (Initial Public Offering): Energy Fizz may consider selling its shares and stocks to the public. This option is the quickest, most profitable to investors and owners, and can produce a large amount of money in a very short time. However, post to the internet bubble that burst in 2000, the option of IPOs has been significantly declined and now only 15% of business opt for this strategy. There are only 7000 Public Limited Corporations in U.S right now. This shows that IPO has become a rare trend. In the modern business scenario, the demand of the stakeholder is very high and so are the concerns of liabilities (Moses, 2013).
Friendly Sale: It is another great strategy to cash out your business. Energy Fizz owner may opt for an ideal buyer from the family who they believe can operate the venture similarly. However, one of the biggest disadvantages of friendly sales is that the sellers usually leave a lot of money on the negotiation table due to family relations or friendship (Moses, 2013).
Mergers & Acquisitions: Energy Fizz may consider an option of merging with smaller or competing businesses or may be acquired by a bigger player. This could be a win-win situation for both the counterparts as it will offer them combining their resources, skills, growth opportunities, and profits (Burgelman, 2014).
Cash Cow Investments/Lifestyle Company: If a business is stable, secured a sound marketplace, and has a steady stream of revenues as in the case of Energy Fizz, then it can think of paying off its investors and find someone to run the business. Whereas, it can think of investing the remaining cash in developing a new business in order to enjoy its annuity for the lifetime (Mohandas, 2012).
Management Buy-Out: This is another strategy that Energy Fizz could think of where the existing management could acquire the controlling shares of the business (Moses, 2013).
Liquidation/Shut Down: One last strategy for Energy Fizz is the simple shut down of operations. However, the instance is somber and should only be considered in forced situations such as heavy loss, natural calamity, or collapse of the market (Inc, 2016).
References
Burgelman, R. A. (2014). A process model of strategic business exit: Implications for an evolutionary perspective on strategy. Strategic management journal, 17(S1), 193-214. Retrieved on June 12, 2016
Inc. Official Website. (2016). How to Choose an Exit Strategy Retrieved From http://www.inc.com/guides/2010/10/how-to-choose-an-exit-strategy.html on June 12, 2016
Mohandas, N. (2012). Exit strategy: one that works. Blood, 119(4), 906-907. Retrieved From http://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1373&context=cjil on June 12, 2016
Moses, J. (2013). Planning Your Exit Strategy: Small Business Valuation. Retrieved on June 12, 2016
