This may sound counterintuitive but this blog explains why thinking about your business exit from the start is a great idea. Ultimately it will help you (as a founder) make smarter choices about funding, team building, and timelines.
In the startup world, founders usually focus on growth, innovation, and shaking up the market. But let’s be honest, we all set up businesses for different reasons: to help us build the life we want; to give us a flexible way of working; and (sometimes) even to change the world. In reality very few companies will do the last of these. Therefore planning your exit from the get-go means you can be clear with yourself and others what your goals are. Whether you’re a founder, investor, or advisor, having an exit plan early on can make a big difference in your company’s long-term success.
By thinking about how you want to exit right from the start, you can make smarter decisions about raising money, building your team, and setting timelines. This blog explores why it’s important to have these conversations early and how it can benefit you in the long run.
Why Founders should think about exiting from Day One
It might seem strange to think about leaving a business you just started, but knowing your exit strategy helps you make better decisions at every step.
Without a clear plan, founders risk:
- Attracting investors with conflicting goals
- Building teams that aren’t suited for long-term growth or acquisition
- Mismanaging timelines, leading to missed opportunities or rushed decisions
On the flip side, founders who plan their exit from day one can ensure every move aligns with the end goal, whether it’s selling the company, going public, or building a sustainable business.
1. Choose the Right Funding (or Not)
Raising money is a big focus for startups, but it’s not always necessary. When you plan your exit, you get clarity on whether you need outside funding and what kind.
Match Your Funding to Your Exit Goals
Different exits need different types of funding. If you’re aiming for hyper scale or IPO, venture capital (VC) is generally necessary to scale fast. But VC money comes with high expectations and pressure to deliver that rapid growth. If you want to scale and exit in 5 years, VC could be right for you but you need to be fully aware of the implications of the deal you’re making and with who.
If your goal is to build a profitable business without rushing, bootstrapping, leveraging family and friends networks or finding angel investors might be a better approach, as it’s unlikely to come with the same rigor and scrutiny as VC money.
Working through this thought process upfront will help you find investors who share your vision and are aligned with your growth plans.
Avoid Investor Misalignment
Founders often take money without considering investors’ goals. VC investors expect (and need) big returns quickly, which can pressure you to scale faster than you’re ready to and force you to give away more of your company than you may be bargaining for.
A clear exit plan means you can communicate your goals to potential investors and ensure they’re on the same page. If your plan is to sell to a strategic buyer or stay private, find investors who support that, not those pushing for an IPO.
2. Build the Right Team for Your Exit
Your team is crucial to your success, and hiring the right people is tied to your exit strategy. Whether you’re aiming for high growth or a stable business, your team’s structure should reflect your goals.
Hiring the Right Team Depending on your Exit Strategy
If your goal is an IPO or acquisition, you’ll need a team experienced in high-growth environments and used to managing the pressure and scrutiny that comes with hyper-scale. Key hires might include experts and executives who’ve lived through building Unicorns and going through an IPO. These may not need to be permanent, full-time, hires as they don’t always come cheap but hiring the right people on a fractional basis is a great way to bring in expertise without breaking the bank.
If you plan to grow more sustainably, focus on hiring or engaging industry experts who can help build a long-term vision. Your team will still need drive and application but there will be more freedom to create your own vision and strategy free from the growth expectations that come with VC investment.
Optimise Your Team Structure
The right structure may also depend on your exit strategy. Having the right people in the right roles and allowing them to grow their teams and departments accordingly will give you the best chance of success. The reality of a growth at all costs strategy, is that mistakes will be made along the way and you’ll need to fix these quickly (and compliantly) if your longer term goals are to be achieved.
By thinking about your exit early, you can ensure your team structure aligns with your goals (and your values), which will allow you to pivot without major changes, if you need to. Thinking about fractional support can empower you on this journey is something more and more founders and leaning into.
3. Set the Right Timeline for Results
Knowing your ideal exit timeline helps set realistic expectations and ensures everyone is working towards the same goal. Are you aiming for a quick exit in 3-5 years, or do you see yourself running the business for 10-15 years and beyond?
Knowing this and communicating it to the team will mean that you can align on expectations and give people the opportunities that they actually want – meaning you should be creating a happy and dynamic team.
Set Milestones Aligned with Your Exit
Exit planning lets you break your journey into clear milestones. For example, if your goal is to be acquired in 5 years, focus needs to be on scaling rapidly, even if it means sacrificing short-term profits. If you’re planning a long-term exit, focus on sustainable growth and building a resilient company.
Setting these milestones early helps avoid burnout, stay focused, and give your team a roadmap to success.
Communicate Your Timeline to Stakeholders
Your exit timeline isn’t just for internal planning—it’s a powerful communication tool. By setting clear expectations for your team, investors, and advisors, you ensure everyone is aligned with the company’s vision.
If you’re aiming for a 3-year exit, your team will prioritise immediate growth strategies. If your timeline is 10 years, focus on sustainability, and invest in long-term projects
4. Why Early (and Continued) Exit Conversations Are Key
Your exit strategy isn’t set in stone. It should evolve as market conditions change and your company grows. That’s why early and frequent conversations with co-founders, investors, and advisors about your exit plan are essential, you need to keep yourself and those around you focused and aligned on the end-goal.
Talk with Co-Founders
Misalignment between co-founders is a common reason startups fail and it all hinges on a lack of clear communication upfront. Early, honest discussions about your long-term goals, including your exit strategy, can help avoid conflict and ensure you’re on the same page both as you start the business and as you grow.
Talk with Investors
Investors are a critical part of your exit strategy. Being transparent about your plans helps attract the right investors who support your vision, reducing potential conflicts as your company grows. Having the wrong investors means you could be forced on a journey you may never have intended. The road to an Exit is littered with burned out founders who didn’t fully appreciate the length and complexity of the journey and failed to prepare accordingly.
Talk with Advisors
Advisors bring valuable experience and outside perspectives. Lean on them and their networks as these are people who’ve either navigated exits themselves or have seen and dealt with 100s in their time. This level of expertise means they’re a great source of knowledge to help you stay on a perilous track.
Conclusion: The Advantage of Planning Your Exit Early
It’s a really top tip to think about your exit strategy from Day 1 (and something I’m glad I was advised to do early on in our journey). It helps bring clarity and means you will make better decisions across the business. From funding, building the right team, and setting a realistic timeline (and goal) for success. Most importantly, it opens the door to early and ongoing conversations with your key stakeholders be they: co-founders, investors, and advisors, ensuring everyone is aligned with your long-term goals. This will reduce friction, fallouts and burnout as everyone has signed up to the same journey from the outset.
Don’t think that starting with the end in mind, means limiting your ambition—you’re giving your business the best chance to thrive on your terms and to achieve the ambitions you want around your own personal circumstances. Knowing you’re aiming for an IPO, acquisition, or building a sustainable company, and having at least thought through your own exit plan will shape many key decisions for the better, even if plans ultimately may change along the way.
The preceding information does not constitute legal advice and should not be relied upon for making business or legal decisions.
Author: Bill Cogan
Founder
Bill is a dual-qualified lawyer, licensed in both England & Wales and New York, with a Master's degree from the University of California, Berkeley.
As the founder of Seven Legal, Bill delivers practical, commercially focused legal advice to high-growth tech companies and their investors. His cross-industry experience enables him to help clients and investors navigate legal complexities and accelerate business growth.
Seven Legal provides stage specific legal advice for fast growth technology companies. Built on advising hundreds of founding teams in the UK, US and India with funding, scaling and exiting high growth ventures, our expert tech lawyers will be a growth enabler for your business.