Growth Milestones, Exit Strategy, and Return Analysis
- Miguel Virgen, PhD Student in Business
- Nov 23, 2025
- 9 min read
For many entrepreneur raising capital for their startup can be one of the most exiting memorable thing they can partake in their entrepreneurial journey. Raising the appropriate amount of funds at the right time can make a major difference on whether or not the firm will become successful or become stagnate. To further elaborate on the exiting journey of raising capital for business startups, I will be discussing growth milestones, exit strategy, and return analysis. These three elements can assist founders and investors when it comes to making business strategies, investment decisions, and how to analysis business progress and performance.
Growth Milestones
Growth milestones are clear, timebound tasks that show a startup’s progress and trajectory. It is a key objective for startup ventures to quickly reach critical milestones to ensure viable venture performance, increasing the likelihood of venture survival. Moreover, swift milestone achievement has advantages for product development and competitive advantage (Toroslu, A. et al., 2023). Growth milestones can be used to break down a big goals into manageable steps, keeping the team focused on the tasks at hand without being sidetracked with how large the project might be. Growth milestones can also be used to show company achievements to investors in order to show growth and credibility to help the company secure additional funding. Digitalization in the business world is one of the crucial milestones that has generated great expectations and levels of importance in different business sectors, which is why it s also important to analyze the influence of digital marketing (Nancy-Tupac, Y. et. Al., 2024). Some founder can use certain milestone to signal to them when it is time to hire additional personal, or to expand operations. For example, one milestone can be as simple as obtaining real customer feedback from a minimal viable product (MVP), this milestone can then signal to the founder that the idea can be feasible. Additionally, for a business that is already operating, a growth milestone can be an increase in customer retention rates, increase in daily sales, and/ or an increase in daily website traffic.
After a business reaching some of the set growth milestones, then the founders can make a decision to scale the company by entering a new geographical area or entering into a new customer segment. This would then require some new additional growth milestone in like partnerships, or reaching an x number of customers in a new country in order to signal that the business is in the right path. Another option a founder may have after reaching a growth milestone can be hiring new employees to cover key leadership roles that can help drive the companies success. By correlating both capital funding to growth milestones, startups can align incentives with investors to get additional funding that aligns directly with measurable progress. Hence, receiving funding to enter new markets or to hire new talent.
Exit Strategy
A business exit is a difficult decision to accept and implement, especially when owners are highly emotionally involved with their business, and exiting a business can be the most drastic, irreversible, and fundamental strategic action that a firm can take on (Chirico, F. et al., 2020). An exit strategy outlines how founders and investors will eventually realize returns on their investment. While exits can occur many years down the line, planning for them should begin during the early stages of a startup.
The types of Exits for a company include initial public offering (IPO), merger and acquisition, secondary sale, or a management buyout. Offering an initial public offering gives the companies founders, partners, and investors the opportunity to for a big valuation uplift, and return on their investment. However, this route requires rigorous financial controls, and regulatory compliance. Acquisitions may involve multiple strategic considerations that range from efficiency and market expansion to knowledge transfer. Thus, creating synergy, a form of value creation that can be realized only by the combination and interaction of two previously independent company’s (Bauer, F. et al., 2024). Mergers and acquisitions may be one of the more common exit paths in which larger more established companies acquire startups to get access to new technologies, talent, or even new markets. In a secondary sale, early investors or employees may sell part of their equity to later stage investors making it a faster alternative for early investors that want to liquidate their stake in the company.
Finally, a management buyout may be used in order to transfer the company’s ownership to executive teams, which is also another way for a faster liquidation for early investors. Clearly explaining the preferred exit strategy to investors during fundraising rounds can help to set realistic expectations. Forecasting and researching potential market valuations, and potential acquirers helps founders, partners, and investors to guide the startup toward the preferred exit strategy.
Return Analysis
Return analysis can be used to quantify the financial outcome of investing in a startup company. Each exit strategy can provide different cash flows and valuations. Three metrics can be used for a return analysis, such as, Multiple on Invested Capital (MOIC), Internal Rate of Return (IRR), and CashOnCash (CoC). In regards to MOIC, it equals the total value returned divided by the initial capital invested, and it can be a straightforward way to analyze a potential return but does not account for the time value of money. The second option, IRR can be used to calculate the annualized effective compounded return rate, solving for the discount rate that sets the net present value (NPV) of future cash flows to zero. IRR provides a way for comparing startup investments to other asset classes. Finally, CoC tracks actual cash distributions relative to capital invested. With the return-oriented metrics of the MOIC and the IRR, it provides a summary picture of the cash-flow characteristics of an investment (Castilla, R. et al., 2022). Startup investing carries substantial downside risk; a significant percentage of ventures fail entirely. Consequently, returns from successful “home runs” must offset losses from under performers. Additionally, Understanding sales and customer targets along with exit multiples can guide founders in negotiating investment terms that balance valuation against dilution, and ultimately staying on the right track to achieving sustainable growth and value realization.
Conclusion
In conclusion, raising funding for a startup requires more than pitching a compelling vision, there is also a need for a demonstration of actionable growth milestones, a preferred exit strategy, and a well researched return analysis. In doing so, startup company’s can put themselves in a position where they can raise funding and also create sustainable value for all stakeholders with a clear road map where everyone included in the startup can reference to for guidance on taking the startup to reaching its goals in reaching new markets, growing employee headcount, increasing sales, reaching valuation, and getting to the desired exit strategy.
References:
Toroslu, A., Herrmann, A. M., Chappin, M. M. H., Schemmann, B., Herrmann, A. M., Chappin, M. M., & Castaldi, C. (2023). Open innovation in nascent ventures: Does openness influence the speed of reaching critical milestones? Technovation, 124. https://doi.org/10.1016/j.technovation.2023.102732
Nancy Tupac, Y. L., Haro-Zea, K., & Díaz Saavedra, R. A. (2024). Digital marketing and customer orientation as predictors of sustainability in tourism SMES. Innovative Marketing, 20(1), 160-171. https://doi.org/10.21511/im.20(1).2024.14
Chirico, F., Gómez-Mejia, L. R., Hellerstedt, K., Withers, M., Gómez-Mejia, L. R., & Nordqvist, M. (2020). To Merge, Sell, or Liquidate? Socioemotional Wealth, Family Control, and the Choice of Business Exit. Journal of Management., 46(8), 1342–1379. https://doi.org/10.1177/0149206318818723
Bauer, F., & Friesl, M. (2024). Synergy Evaluation in Mergers and Acquisitions: An Attention‐Based View. Journal of Management Studies., 61(1), 37–68. https://doi.org/10.1111/joms.12804
Castilla, R., David-Visser, F., & Brophy, D. (2022). Proposing a New Metric: Private Fund Duration. Journal of Portfolio Management., 48(9), 61–72. https://doi.org/10.3905/jpm.2022.1.397
-Miguel Virgen, PhD Student
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Further Responses and Discussion:
Thank you for your insightful contribution to this week’s discussion. You explained thoroughly the growth milestones; however, I would like to expand on it. Business sustainability is a common topic in management and business studies. Thus far, the concept has been related to entrepreneurs’ character, funding, networks, and strategy(Bakhtiar et al., 2023). Growth milestones in a business context are significant for several reasons. They can measure progress. They serve as tangible benchmarks to measure a company’s progress over time. By setting and achieving growth milestones, businesses can track their advancement toward specific goals, such as revenue targets, market expansion, or product development.
Strategic planning is another outcome of growth milestones. Milestones help in strategic planning by breaking down larger objectives into manageable pieces. This allows businesses to focus on short-term achievements that cumulatively contribute to long-term success. Another outcome is motivation and engagement. Achieving milestones can be highly motivating for the team. It provides a sense of accomplishment and can boost morale, leading to increased productivity and engagement among employees. Risk management is another outcome of growth milestones. By regularly assessing progress against milestones, businesses can identify potential risks or challenges early on. This proactive approach can help in adjusting strategies to mitigate risks and capitalize on opportunities. Resource allocation is another outcome of growth milestones. Milestones help in efficient resource allocation by identifying areas that require additional investment or attention. They can guide decisions regarding staffing, budgeting, and prioritizing projects. Investor relations is another reason for growth milestones. For startups and growing businesses, hitting growth milestones is crucial for maintaining investor confidence. Milestones provide tangible evidence of progress and potential return on investment, which can attract new investors and satisfy existing ones.
Market positioning is another reason for growth milestones. Reaching growth milestones can enhance a company’s credibility and competitive position in the market. It signals to customers, partners, and competitors that the business is stable, innovative, and capable of growth.
Another outcome for growth milestones is operational efficiency. In examining the direct effect of internal factor within a business organization, Handoyo et al (2023) findings indicated that business strategy, operational efficiency, and ownership structure positively and significantly affect manufacturing performance. Tracking growth milestones can lead to improved operational efficiency. As businesses strive to meet these benchmarks, they often streamline processes and enhance systems to support growth.
In summary, growth milestones are significant because they offer a structured way to plan, execute, and evaluate a business’s development. They create a roadmap for success, facilitate better decision-making, and ensure the business is on track to meet its strategic objectives.
References
Bachtiar, N. K., Setiawan, A., Prastyan, G. A., & Kijkasiwat, P. (2023). Business resilience and growth strategy transformation post crisis. Journal of Innovation and Entrepreneurship, 12(1), 1-25.
Handoyo, S., Suharman, H., Ghani, E. K., & Soedarsono, S. (2023). A business strategy, operational efficiency, ownership structure, and manufacturing performance: The moderating role of market uncertainty and competition intensity and its implication on open innovation. Journal of Open Innovation: Technology, Market, and Complexity, 9(2), 100039.
-Safoura Asgari, PhD Student
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Miguel, thank you for your thread regarding growth milestones, exit strategy, and return analysis. Regarding the topic of exit strategy, you referenced an article that touched on how a business exit is a difficult decision. In all of the exit strategy talk, I haven’t once thought of this, nor read any research on this theory. I found this fascinating this so interesting as it would be very difficult to make this decision to exit a business that one has worked so hard to start up. As you mentioned, owners can be highly emotional and exits are very difficult to reverse. This made me want to research this idea in more detail.
Oftentimes, emotional exit strategies exist when businesses are family-owned and operated, specifically in the context of succession planning in family firms (Kammerlander & Khoury, 2025). Activist Private Equity Investors focus on financial returns and offer a higher sale price, whereas Steward Private Equity Investors prioritize maintaining the firm’s culture, value, and stability, which sometimes keeps family involvement (Kammerlander & Khoury, 2025). Out of 200 family business owner-managers, owners who value non-financial goals are less likely to sell to Activist Private Equity Investors. Kammerlander and Khoury (2025) also found that a strong financial performance and innovation focus can lead to a more open mind when it comes to accepting Activist Private Equity Investors. Overall, the researchers concluded that exit strategies in family firms are more than just a financial decision. It is a value-driven process that can be influenced based on family legacy, emotion, and long-term vision of the company (Kammerlander & Khoury, 2025).
Viljamaa, Joensuu-Salo, & Varamäki (2024) discuss how exit strategies can stir up emotional decisions when it comes to aging entrepreneurs, specifically when exit is due to retirement. Their research highlights that while some exits are planned, many are influenced by emotions, values, and the entrepreneur’s sense of identity with the business.
Miguel, thank you for pointing out a topic that I had not read much about. There is a decent amount of research that has been conducted around emotional ties to businesses and what their exit strategies look like.
References
Kammerlander, N., & Khoury, C. (2025). Family firm exit: A vignette study on selling to an activist versus a steward private equity investor. International Small Business Journal, 43(3), 274-302. https://doi.org/10.1177/02662426251316229
Viljamaa, A., Joensuu-Salo, S., & Varamäki, E. (2024). Retiring entrepreneurs and succession planning: Does entry mode determine exit strategy? Journal of Small Business and Enterprise Development, 31(5), 1021-1038. https://doi.org/10.1108/JSBED-05-2023-0203
-Meagan Swafford, PhD Student
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Publisher Note
Miguel Virgen, PhD Student. I have no known conflict of interest to disclose.
Correspondence concerning this article should be addressed to
Miguel Virgen, Email: support@doctorsinbusinessjournal.com
