Creating an exit strategy for your business

A business plan often centres around plotting how to establish a venture and grow it past the startup stage. Not many may include an exit strategy in the plan, thinking that such an idea only applies when things turn south, such as a loss or bankruptcy. On the contrary, an exit strategy is employed not only during difficult situations but even during times when the business is faring well, which is the more commendable route.


Those who think long-term see an exit strategy as a succession plan or a way to grow the business or the entrepreneur. An exit strategy is a plan by the owner, investor or venture capitalist to leave a business and withdraw its involvement, particularly from a financial standpoint.

Reasons to exit a business

There are various reasons why an owner would exit from the business. Some of them may be personal intentions or may be due to economics. Such motives, although not all, may be any of the following:

  • Health – Running a business may take a toll on one’s well-being physically, emotionally and mentally. It is not at all times that the entrepreneur is at the pink of health, and age or retirement is also inevitable.

  • Family – Priorities change over time. One may prefer to spend more time with their families or may have to move to a different location or more pressing matters that require his attention.

  • Financial disruptions – Internal and external factors always affect the security of the business. Mismanagement, fraud, legal battles, economic crisis, natural disaster – all these may suddenly turn the enterprise upside down.

  • Change of interest – One’s focus or interest may evolve along the entrepreneurial journey. The owner or investor may find something more interesting to devote his time, resources and energy.

  • Better opportunities – A better offer or opening for the owner may be a motivation to leave the business. Something more attractive and lucrative that may come along the way that can be too difficult to resist.

  • Growth for the business – Often, the best direction to increase the capacity of the enterprise is to place it on the hands of someone who can handle such growth.

  • Serial entrepreneur – Many entrepreneurs are good in establishing startups that they find fulfilment in creating ventures, making them grow and then transitioning the business to new owners.

Methods to exit a business

An entrepreneur or investor may look into different possibilities for exiting a business. Below are various options that you can review to choose the best approach to pass on the venture to a new owner or set of owners. Each has its pros and cons, so it is better to consult with experts rather than jumping into a decision that may bring more drawbacks than benefits to you and your investors. Keep in mind as well that the process of exiting does not happen overnight, and the transition may take longer than expected.

  • Initial Public Offering (IPO) – making your business public means selling your stocks to anyone interested to be a shareholder. This option can bring in big returns and may enable you to return the capital of your investors. However, it may require several things, including satisfying stockholders, which means conditions must be good enough to attract buyers. Plus, one has to be ready for varying scenarios as the stock market may sometimes be volatile. Going public can become a huge success, but the risks are also high.

  • Mergers and acquisitions (M&A) – a bigger company of similar interests or from the same industry may acquire your business or merge it to their current set-up. This method allows the acquiring company to enlarge its scope and offerings while, at the same time, provide the acquired company with the benefit of recouping its investments.

  • Management buyouts – the people who best know your business inside-out are your executives and employees. They may be setting their eyes at owning the company, and the buyout will be an opportunity for them to have a bigger stake in the enterprise. It also allows for a smoother transition, which may be more amenable to your present partners and clientele.

  • Family succession – if any of your family members is involved in the business or has their eye on the company, you can maintain your legacy by passing on your enterprise to them.

  • Sell shares to partners – if the venture is owned by two or more individuals, there is the likelihood of selling your shares to any or all of the remaining business partners. It’s an easier path for the majority, but this is only applicable to ventures where it’s not a sole proprietorship.

  • Sell to an individual or group – none within your internal environment may be interested in taking over the company. You can then look into a private individual or group of persons that may want to buy the enterprise.

If things are not going well and your exit strategy is your last resort, then you may consider liquidating your business or filing for bankruptcy. But you wouldn’t want to have a bleak end to all your efforts, that’s why it’s good to have an exit strategy prepared at a crucial point of your venture. Always be ready for the inevitable and take action before do not turn on your favour. So, think ahead and start drafting your exit strategies that will end in a win-win situation for everyone.