**2.7 Types of revenue models**

Money and how to get a good return are top of mind when creating an exit strategy. From a financial standpoint, it is necessary to understand financial risks, any barriers to entry due to a change in the business owner, and also if there is any advantage that remains sustainable.

In financial reporting, it is ideal the business seeking to exit can reveal multiple income streams allowing for flexibility when it comes to beating the competition and being able to meet new goals. These income streams include: -

	- With this revenue model, it is easy to transition as part of the exit strategy. This is because, for the most part, the business will remain as usual, which is the most ideal scenario for a next generation successor. Revenue is earned through the company offering a product or service, and the customer making payments for it.
	- With this revenue model, customers pay a subscription fee to gain access to the product or service. It could also be a subscription model where customers pay for a product in installments over some time. For an exit strategy, it is crucial to determine whether this model is in place as it has a high risk.

Customers may not finish their payment or choose to unsubscribe in the event of a chance of the business owner. It remains an attractive option for next generation successors due to generating recurring revenue.

#### **2.8 Trade-offs between long vs. short term exit strategy**

When considering a long term or short-term exit strategy, the goals, as well as the sustainability of the company, can more easily be aligned. Consider the following example. A business wants to work towards an IPO option within five years. To meet this long-term goal, there are specific steps that will be taken with a short-term strategy. These could include the product or service offering and even pricing and competition. In effect, the long-term goal for investment is the primary consideration, while everything in the short term is viewed as a tactic towards meeting this goal.

The type of exit strategy that you choose, whether long term or short term, will also affect the value you can receive. This is why a business owner needs to select their preferred exit strategy. Exiting can take as little as one year, and even up to ten years to accomplish well.

### **3. Research methods**

The research method that was used to collect data for analysis and discussion is secondary qualitative research. This data was collated from a range of journals, all of which were addressing a different touchpoint of exit strategies. The aim of seeking for information across different platforms was to identify joining factors as well as identify any patterns in approaching exit strategies. Therefore, the review and analysis have been carried out on existing literature, including literature that offers comparisons of exit strategy situations in different countries.

The data collected was non-numeric. The journals and other content sources that were referred to were based on small studies that offer insight into a business or section of industry. For this reason, this paper focuses on analysis of their conclusions, more so than their data sets. This allows for deductive reason, though may also be viewed as a practical limitation. Furthermore, this paper attempts to understand cultural nuances that may impact the exit strategy process, as explored through the literature studies.

The analysis focuses on the meaning of exit strategies, both for the business owner and the investors. Through research analysis, it became clear that from end to end, exit strategies begin with the owner and culminate with the potential effect on the investors. By seeking to analyze this process, this paper seeks to understand the implications of choosing one specific strategy, as well as how to ensure that the strategy is carried out from start to finish. The secondary qualitative research is interpretive in nature, as this paper offers exploration into the topic building on theoretic principles that are in existence within the literature [12].

#### **3.1 Discussion**

The research reveals that there are positive reasons for an exit strategy, and that this strategy should form a core component of any business documentation. The exit strategy guides decision making, both for the next generation owner and the exiting business owner. This means that it acts as a blueprint for what actions should be taken in the event that an exit is imminent. With this blueprint, it becomes easier to determine the factors that can affect any exit strategy including the time needed, intention and business objectives for the business. Furthermore, there are numerous courses of action that a business owner can take following the

#### *Discerning the Strategies for Exiting Your Business DOI: http://dx.doi.org/10.5772/intechopen.98338*

strategy that include being available for consultation within the business, or a full exit meaning the business and its operations are totally in new hands.

For the new owner, it touches on how they can ensure a return on the investment that they make with the business. By the business owner understanding the goal of the investor, the exit strategy can ensure that the business operations are competent and aligned to a certain exit strategy that is most likely. Money, or a return on investment is also essential for the business owner, and this may guide the number of months or years that the business owner works through making their exit.

Therefore, there are ongoing actions that the business owner needs to ensure take place, both for them and the investor. These including profit monitoring, staying legally compliant and setting up contracts with suppliers and stakeholders. From the literature, it becomes clear that ensuring these actions are in place will result in the right exit strategy being chosen.

## **4. Conclusion**

A business owner who starts their venture may create five-year plans that seek to drive profits and sales. Also, business owners desire to achieve growth, taking their business from one level of success to the next. However, it is essential to create an exit strategy if things do not go according to the plan. Not only is this a plan that will guide business operations, but it is also a fail-safe to ensure that the business is never caught off guard in case of any operational challenges. The earlier in the life of the business, the easier the transition will be when it is necessary.

An exit strategy is vital to ensure that the company has the right revenue models and legal structure. Furthermore, it provides direction on investment, especially when looking at short and long-term growth goals and the types of investors that would be beneficial to the business. In the heat of the moment, putting together an exit strategy with tight time restraints may result in gaps that cost the business owner dearly. A logical and well-thought-out plan will ensure that there is minimal loss and that investments of all stakeholders are well protected.

To create the exit strategy, a finance professional like an accountant should be at the forefront of the draft plan. This finance professional should coordinate their work with a business attorney so that all due process is followed. Together, they will create the initial draft. Additional information can be added in from key managers and members of an exit strategy advisory committee. With all these contributions, it becomes possible to have a highly comprehensive document that can be updated when necessary.

Many people opt to write a will to ensure proper division of their assets should they pass away. This does not mean that they are planning to die. In fact, it is viewed as something highly responsible to do. It is similar to creating a business exit strategy. It does not speak to the commitment of the entrepreneur. It is merely a readiness tool to prepare for any eventuality [13].

There is something worth considering when creating an exit strategy, and that is how to react and respond to an unexpected offer by large companies who may be seeking an acquisition. This helps ensure that the business owner has some insight and can guide a negotiation well if a buyer is available. Sometimes exit is not voluntary, and even in this situation, significant benefits can be realized.

Future research should seek to analyze an actual exit strategy, seeking insights and opinions from all stakeholders. These should help to determine the planning phase effectiveness, those involved in the process, and the end result. Carrying out these end to end studies will help with understanding which processes are the most effective from start to finish. Furthermore, it will become easier to identify loopholes that may cause an interruption to executing an exit strategy.

*Risk Management*
