Exit Option
Categories: Company Management
Like a prenup for businesses.
Your brother-in-law approaches you with a plan to open a chain of biscuit and gravy restaurants in rest stops all along major highways.
You think travelers will like the biscuits and gravy, but you're not sure about your brother-in-law's business acumen. So you include an exit option as part of the business plan.
Basically, this gives you an early out if things don't look good during the initial stages of rolling out the business. When putting together the project, you include pre-arranged targets that need to be met. A date by which the first restaurant has to be built, a minimum revenue level at the first restaurant before a second one is built...things of that nature.
Further financing would be contingent on achieving these marks. If things don't go as planned, you can pull out your money before it becomes a true disaster.