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I have an idea in global commerce area and I am trying to develop it to a software product. I shared my thoughts with several experts and got their positive feedback.

Currently, I am working on a business plan and my question is:

Assuming that the plan B (more realistic than the IPO) is exit and I target 3 big SW companies that shares the ERP market, how do I plan the exit\exit strategy? What are the critical points I must consider?

Any tips would be appreciated.

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3 Answers

up vote 2 down vote accepted

Focusing on an exit and on making yourself attractive to competition is likely to cause you to miss the boat on making a product and business that users want. As others have said - this is the wrong priority and wrong focus.

You can think about it, but don't make plans for any of it. None of it is likely to happen - most plans get blown out of the water within a few months, much less last years.

Mention possible exits in a business plan, but to really have any hope you need to have a compelling product, not a compelling business plan with imaginary exits.

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Thank you for the answer. However, the question was not about focusing. The business plan has certain points to be considered. One of them is exit strategy. I was asking for advice how to plan it (sorry for misunderstanding I caused by mentioning that the IPO is less realistic scenario than an exit) – aviad Apr 1 '11 at 10:25
up vote 5 down vote

You're wasting valuable resources now thinking about the exit plan. You don't even have a product yet. Your time would be better spent focusing on building a business first. Otherwise you're just day dreaming now.

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I have to agree with this, that said, sometimes investors will expect you to have considered it. – David Mar 30 '11 at 13:03
To build the business I need to raise a fund. To raise a fund I need to approach VCs with the business plan. One of the things VC wants to see in the business plan is the exit strategy. – aviad Mar 30 '11 at 13:06
This is also way better than the other answer - stop thinking about the exit - make something customers want. – TimJ♦ Mar 30 '11 at 14:04
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I think gone are the days when you can raise money using a PowerPoint presentation. I seriously doubt you'll be able to raise money with just a business plan. But that's just me. I wish you good luck! I sincerely do. – Mircea Grelus Mar 30 '11 at 15:40
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@aviad It's easy to look just for those opinions that validate your ideas. I was trying to get a different view across. So I believe my answers addressed your question, it's just that they encouraged a different perspective on your situation. – Mircea Grelus Mar 31 '11 at 9:52
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up vote 4 down vote

I'd look at it from the point of view of the companies who might buy you out in x years time. They either want to do one of two things:

  1. Remove you from the market because they are losing too many customers to you.
  2. Add your product to theirs because you add useful features, you have higher growth and you open up new markets for them.

(1) is quite a negative way to approach it and companies often just try to increase their competition rather than buy you out. That said if you bring them a lot of useful customers paying annual maintenance, that helps.

(2) tends to be the better route to go down. Think about what extensions to their current markets there are. They should be niche currently, but you should target those that should grow into useful market volumes. Look by vertical domains (specific industry extensions to the ERP), by countries, by business size, etc.

One thing to remember with either exit is that they will need to integrate your technology and customers with their technology. Think about this from the start. What technologies do your selected companies use? Are you able to integrate with their storage formats, including import/export?

Import is critical for grabbing customers from them, export is critical for a buy-out, it gives that company an easy way to bring your customers over. Think about a very clear XML storage format and use standards wherever possible.

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Thank you for the detailed answer! – aviad Mar 30 '11 at 13:04

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