Documenting The Exit Strategy In Your Business Plan. Do You Love Food? - Then Maybe Opening a Restaurant is Not Such A Crazy Ide

All investors greatly desire and are motivated by a clear picture of a company’s exit strategy, or the timing and method through which they can “cash in” on their investment. This picture best comes into focus when the key valuation and liquidity drivers of the company are clearly delineated. An excellent method to accomplish this is through descriptions of comparable firms that have had successful liquidity events, either through acquisition, merger, of initial public offerings (IPOs). nnIt is helpful to show other companies in your market, or similar companies in other markets, who have successfully exited, and how and why these companies were successful. For instance, were they successful since they acquired a large customer base? Or were they successful since they accomplished fast growth or high profit margins? It is also important to tie their success to their exit price. Was the exit price based on earnings or the number of customers the firm had at the time? The business plan should tie these metrics (e.g., exit price of $X per customer) to the business to determine its future price. nnThe most common exit strategies in business plans are IPOs or acquisitions. While the method of exit is not always crucial, the investor often wants to see the decision to better understand the management team’s motivation and commitment to building long-term value. If acquisition is the selected exit path, then the business plan should detail potential companies that might want to acquire the firm in the future and why. Likewise, if an IPO is expected in the future, the business plan should document the financial metrics of the company that make it ripe for this type of exit. nnIn most cases, investors only make money when the business reaches a successful exit event. As such, it is critical that business plans explain the expected exit, detail why this exit was chosen and validate a realistic exit price.nDo You Love Food? - Then Maybe Opening a Restaurant is Not Such a Crazy IdeannThe restaurant industry in the United States employs an estimated 12.2 million people, making it the nation's largest employer outside of government agencies. nnThe restaurant industry in the United States employs an estimated 12.2 million people, making it the nation's largest employer outside of government agencies. This industry provides work for more than 9 percent of those employed in the United States. nnEating-and-drinking places are extremely labor-intensive -- sales per full-time-equivalent employee were $57,567 in 2003 and notably lower than other industries. More than four out of 10 adults have worked in the restaurant industry at some time during their lives and 27 percent of adults got their first job experience in a restaurant. Every additional $1 million in restaurant sales generates an additional 42 jobs for the nation's economy. In 2004 more than 54 billion meals were eaten in restaurants and school and work cafeterias. nnThe typical employee in a foodservice occupation is: n- Female 55% n- Under 30 years of age 52% n- Single 68% nnBetween 1970 and 2002, restaurant-industry sales will post a compound annual growth rate of 7.3 percent. Industry pundits are now tipping that restaurant industry sales on a typical day in 2005 will topple $1.3 billion. This equates to an annual estimate for 2005 of $476 billion in restaurant sales. This also includes the impact that such sales will generate in related industries such as agriculture, transportation and manufacturing. They estimate that there will be more than 900,000 locations serving more than 70 billion meal and snacks. The industry will continue to expand driven by the desire of American's need for convenience an increase in their disposable income, and the need for fast food to fit today's busy lifestyles.n