Business Exit: Planning

Create a business exit strategy as part of your business plan. Here’s what to know, plus a template example to get you started.

    Business exit planning is strategically planning for and managing transfer of ownership and control of a business. A business exit that is strategic optimizes outcomes for founders and owners and provides a clear pathway forwards. 

    However, according to William Buck’s Exit Smart Survey Report 2024, half of business owners (50%) don’t have an exit strategy.

    If you own a business, it makes sense to plan for your business exit - even if you plan for family succession. Be proactive, be prepared, and find out everything you need to know about business exit planning. 

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    Be prepared for your exit to ensure your post-retirement future. This checklist helps you align your company with your exit goals, whether they are imminent or years away.

    What is exit planning in business?

    A business exit strategy gives a business owner a defined plan regarding how they will reduce or liquidate their ownership stake, and, if the business is successful, make a profit at exit. If a business is not successful, the exit strategy plan focuses on limiting losses. 

    Exit planning can inform business strategy to achieve certain goals and outcomes and to minimize exposure to certain risks.
     

    How to write an exit strategy for a business plan

    Starting a business can be a dream come true, but when it comes time to move on, many are underprepared. Whether the business is highly successful or just making ends meet, how to exit the business defines the profit you ultimately realize. 

    With a solid plan in place, you can ensure that your business is in tip-top shape for an ownership transfer, sale of the business, or winding up, maximising the exit value. Here’s how to create an exit strategy as part of your business plan, so you are prepared when the moment comes.  

    1. Define your exit goals

    The first step in business exit planning is to understand your goals. A crucial part of this step is asking yourself how long you want to stay involved in the business, whether you want to exit at a certain date, or once the business reaches certain performance goals.

    Market changes and other external factors may impact the timing of your business exit, so be prepared to adjust the timeline. Define your financial goals and assess any creditors and investors who must be paid. 

    2. Choose an exit strategy

    The way you choose to exit will depend on the timing of the exit, the health of the business, and your preparation. If you see your involvement being long-term, you might plan to liquidate or sell your shares to other investors or business partners when you exit. If you plan to be in the business for a shorter time, you might consider M&A or an IPO. 

    Research the pros and cons of different types of exit strategies to determine which are suitable for your business. You may include more than one strategy in your exit planning to cover different scenarios that may arise. 

    Eight common business exit strategies include:
    Ultimately, each exit strategy suits a particular business in a particular moment. Your business exit plan may include your preferred, ambitious exit strategy, and another option that allows a quick exit, while optimizing value or minimizing loss, when circumstances may not be optimal.

    3. Start planning documentation

    A documented exit strategy can help business owners convert the business value into personal wealth on exit. The best way to avoid the risks associated with poor business exit planning is to start early. 

    Once you have identified your exit goals and suitable business exit strategies for possible scenarios, you are ready to start planning the documentation that will support a smooth exit process. 

    Preparing to exit a business can take between 3 and 5 years, so planning ahead is critical for a smooth and quick transition. Leaving exit planning until the eleventh hour may mean a lower valuation of the business at the time of exit. 

    The documentation for a business exit will vary depending on the strategy. However, robust governance documentation, financial reports, and processes will support an optimal outcome in all circumstances. 

    If you plan to go to IPO, the business must prepare to meet the regulatory requirements of listing publicly. If your exit strategy is M&A, having clear and organized documentation can help to streamline due diligence and capture the maximum valuation for the business. 

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    Exit planning for business owners

    With an exit strategy in place, you can begin planning the ownership and management succession for the company. A clear transition plan can help to ensure that all stakeholders are well-informed and prepared for the next steps. 

    Your leadership team's KPIs can be set to align with the overall business strategy and exit goals. To ensure your exit planning is comprehensive, bring together a team that has the expertise, knowledge, and decision-making power to execute it. 

    Exit planning will affect the employees, management, leadership teams, customers, and the new owners. To create a comprehensive exit plan that leaves nothing to chance, you will need the right team. 

    Exit planning team for a business strategy

    Shareholders

    The exit plan is part of your business strategy, so all business shareholders should be informed and able to assess their personal and business exit readiness. 

    Trusted business advisor

    An experienced and qualified business advisor can provide honest feedback, draw on their past experience and provide guidance regarding growth strategies, financial management and exit strategies. 

    Commercial lawyers

    A legal team can ensure your business is ready for due diligence and deliver legal advice for the transfer of ownership, contracts, M&A or IPO. 

    Accounting team

    Full financial documentation is required for every business exit strategy. An experienced accounting team can advise on tax and other financial considerations when selling or transferring ownership.

    Exit strategies for a failing business

    When circumstances change rapidly, whether it’s supply chain disruption, changes to import or export tariffs, a recession, or internal factors, the health of your business may suffer. A good business strategy exit plan will consider an exit in optimal circumstances, and it will also plan for a business exit in circumstances that might not be ideal. 

    Selling a failing business may still be possible, especially if there are assets like property, a desirable customer base, talent, or intellectual property that attract potential buyers. 

    If the business cannot be sold, owners may decide to liquidate to pay off debt or even file for bankruptcy if necessary. 

    Maximize the value of your business at exit with an organized exit strategy

    Organization and planning are crucial to securing the maximum value when you exit a business. Start planning early and integrate your exit goals into your business strategy. Organizing critical business documentation has never been easier — inside our Deals platform, you can set up your virtual data room and other workflows right away, and pay nothing until you invite external parties. 

    Inside this purpose-built workspace, you’ll find a pre-organized business exit checklist that can help you ensure that everything you need to proceed is ready. Streamline your business exit from the beginning with Ansarada’s easy-to-use workflows, folder structures and handy tools like AI redaction, all within a secure, virtual environment. 

    The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

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