What is an exit strategy and do you need one?

An exit strategy is a strategy for exiting from your business at a future date, in a manner that achieves a good outcome for you as the business owner.

Many business gurus recommend that business owners should have an exit strategy from the first day they start a business. The reason for this is that they can then shape the business and develop their strategy to achieve the maximum value at exit.

So if it makes good business sense why do many business owners ignore this advice and not really think very much about exit, often until circumstances beyond their control (bad health, industry change, loss of key personnel etc) force them to consider it? Probably the main reason for this is that they are focussing on the 'day to day' - getting the next order, managing a difficult customer or staff issue etc, exiting from the business seems a long way in the future. Considering their exit in advance however, ideally a few years before they intend to step away from the business can significantly increase their exit value.

Some serial entrepreneurs will have many 'exits' during their business life. A more typical scenario is an 'owner managed' business which an owner has built up over several years. So what are the exit options available in this case?

Exit options could be:

1. Sell the business outright to an external buyer
2. Merger with a similar business
3. Sell the business or shares in the business to key employees
4. Develop a management team, retain ownership but step down to a part-time, less 'hands on' role, continuing to draw income from the business

These are probably the main options but there are 'hybrid' versions, for example making a partial sale but retaining some ownership and involvement in the business.

All of the above options need careful planning and professional help to execute. So if you are starting to think that you might move on from your business in a few years, start thinking about how you will do it now and develop your exit plan. It could be one of the most useful and rewarding things you do in your business life.

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