What does "exit readiness" mean for a portfolio company?

"Exit readiness" refers to a portfolio company's state of preparedness for a sale or initial public offering (IPO) when it comes to its operational and financial aspects. This means that the company must have well-documented processes, strong financial performance, due diligence materials prepared, and a clear understanding of its market position and growth potential.

Achieving exit readiness involves not just anticipating a transition to new ownership but ensuring that the business operates smoothly and efficiently, with all critical metrics and operational benchmarks in place. It also implies that the company can present itself favorably to potential buyers or investors, showcasing how it has strengthened its financial health and operational processes. This comprehensive level of preparedness is vital for maximizing the company's valuation during the exit process.

In contrast, the other choices do not encompass the full scope of what exit readiness entails. For instance, simply having a documented growth strategy is insufficient if operational and financial improvements have not been made. Being ready to expand into new markets does not automatically indicate that a company is ready for an exit; it needs to focus on more than just growth prospects. Additionally, operating without financial oversight poses significant risks and undermines a company’s value, which contradicts the principles of being prepared for an exit.