Business Exit Strategy

Published Aug 3, 2023

Definition of Business Exit Strategy

A business exit strategy is a plan for how a business owner will leave their business. That means it describes the steps the owner will take to transition out of the business and the timeline for doing so. It also includes the steps the owner will take to ensure the business is in a position to be sold or passed on to a successor.

Example

To illustrate this, let’s look at the example of a small business owner who is planning to retire in the next five years. In order to ensure a smooth transition, the owner starts to develop an exit strategy. First, they decide to hire a new manager to take over the day-to-day operations of the business. Then, they start to look for potential buyers for the business. Finally, they create a timeline for the transition and set milestones for each step.

Why Business Exit Strategies Matter

Business exit strategies are important for business owners who are planning to leave their businesses. Without a plan, the transition process can be chaotic and the business may not be in a position to be sold or passed on to a successor. That means the owner may not be able to get the best price for their business or may not be able to pass it on to someone who will continue to run it in the same way. Thus, having a well-thought-out exit strategy is essential for any business owner who is planning to leave their business.