Wednesday, November 5, 2008
Capital West Advisors discusses a possible buy low, sell high exit strategy
Even at the planning stage, the exit strategy is always a significant factor in molding the overal growth strategy of a company. Because most business owners do not understand how to read market indicators and forecasts, many people miss their chance to exit successfully. Why would a company want to exit? Many reasons including high risk of a product or service becoming obselete, high interest in the sector that creates a sales price premium, or attrition of crucial management. These are just a few relevant examples, but it is important to realize that many of the same strategy in buying stock in a company should be used in analyzing the exit strategy in a business. Buy low (startup phase, low cost of entry, low sweat equity investment) sell high (at a premium, people see that you make money, high interest in acquisition, market is about to turn for worst). During a recession could be a good time for buying a small business that has not been affected by the external economic indicators.