Why E-commerce Entrepreneurs Need to Have an Exit Strategy

Starting a business is a major goal in itself; when that business becomes successful, it seems like you’ve accomplished all you wanted. However, we know that things don’t always remain the same. As entrepreneurs, we have to think ahead and keep exit strategies in mind as well.

Most small business owners don’t have any plan for selling off their business. This is quite a glaring omission, especially for entrepreneurs in the e-commerce world.

Not sure why this is so?

Let’s discuss this in more detail.

Constant Changes

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E-commerce is changing rapidly as we speak, so it’s only logical for any entrepreneur to have some sort of plan for moving on. Their marketing strategies might become outdated and it could just get too costly to keep up. There might also be certain changes in policies for social media platforms, which make it necessary to pivot or exit the business altogether.

Take Nokia as an example. The company led the global market in the early 2000s. But it faced downfall in the cellular industry due to its complacent attitude towards accepting the changing market trends. Instead of adapting new strategies for focusing on innovative software, Nokia constantly managed its hardware, and the result was a business that had to come up with an exit strategy: acquisition by Microsoft.

Showing Investors

When you’re pitching your business idea to a group of investors, it’s considered professional to show them a design for an exit strategy as well. This way, they get an idea of how they can get back their investment if you decide to sell in the future.

WhatsApp is one such brand that showcased its future plans to its investor even before heading towards success. The company assured its investor, Sequoia Capital about the fact that it would only take funds from them as its lead investor rather than having multiple investors at a time – this was the conviction WhatsApp made till the end. This commitment strengthened the relationship between WhatsApp and Sequoia Capital. The result was a higher level of trust that led Sequoia Capital to invest $52 million in WhatsApp. Even at the time of implementing its exit strategy (selling its business to Facebook) WhatsApp had raised sufficient funds.

The Next Step

In any case, entrepreneurs should be able to make some sort of retirement or development plan for themselves. At some point in your life, you might be too old or otherwise unable to run a business. You may also want to move on ahead and start new, more interesting projects that challenge your talents.

This is especially true if something unexpected comes up. Take the case of Uber. The company launched UberEats as a business extension in 2014 but recently chose to exit from 7 markets due to the Covid-19 pandemic.

Though we see it as a shutdown, Uber might revive with relatively new strategies in the food delivery industry. So, with the right exit strategy, you’ll be able to keep up that thrill and have a safety net at the same time.

Types of Exit Strategies

Now that we’ve talked a bit about the need for an exit strategy, you should learn how to include an exit strategy into your business plan. It’s also crucial to look at the types at hand. These include the following:

Merging

This strategy means that a larger company merges your business with its own entity. The advantages are obvious, as you can see your company exploring new areas of growth or finally having the capital to expand into new areas. You’ll also be able to get the resources you need to pay off your investors and might even be able to stay on the team without the previous burden of responsibility.

However, this strategy also means that you might have to let most of your staff go. You’d also lose a major chunk of your autonomy and be an employee once more.

IPOs

IPOs stand for Initial Public Offerings, which means that you turn your business over to its shareholders. While this used to be the traditional method for exiting, IPOs are down for online businesses. Investors don’t want to buy into such companies as a rule. But it’s definitely one method to consider before finalizing any decision.

Selling Privately

If an employee is interested in your business, you might want to sell everything off to them. They’d already know the ropes and be loyal to the name. The second best option is to contact a brokerage service. Even if you currently have the top talent in the United States, there should be some agreement about how you can retain some income.

Stepping Away

If you have capable and competent employees who are also sincere, you might choose to step down as the head boss and let them continue. This way, everyone gets to keep their jobs as long as you hire or train a management team to take over. Most entrepreneurs keep this option in mind for their retirement.

The Takeaway

At the end of the day, we just don’t know what the future holds. Therefore, it’s wise to have an exit strategy in place now; it could save you a lot down the line! Plus, doing this will help you focus on devising better strategies for your next business.