A business exit strategy is necessary to secure a business owner’s future. However, according to William Buck’s Exit Smart Survey Report 2019, three-quarters of business owners (34%) don’t actually have an exit plan.

If you own a business, at some point or another you’re going to need to consider your business exit - even if it’s simply to pass the reins onto a family member. So, be proactive, be prepared, and find out everything you need to know about business exit planning in this article. 

What is exit planning?

Exit planning is the process of determining the best route out of your business—whether that be selling it as a going concern, liquidation, or some other type of exit.

When to plan your exit strategy 

The sooner you start writing your company exit plan, the better. If you want to avoid the risks associated with poor business exit planning, a long-term strategy needs to be taken. 

William Buck advises that it takes between 3 and 5 years to set up a business for a successful exit. Leave it to the last minute and you’re stopping your company from realizing its true value.

Fast-track your business exit with Ansarada Deals™—start for free today!

Types of exit strategies

There are eight common business exit strategies:
 

1. Merger and acquisition exit strategy (M&A deals)
2. Selling your stake to a partner or investor
3. Family succession
4. Acquihires
5. Management and employee buyouts (MBO)
6. Initial Public Offering (IPO)
7. Liquidation
8. Bankruptcy

Ultimately, each exit strategy is right for different people, for different reasons. Ambitious entrepreneurs might look at a merger or acquisition, while family succession or MBO could be an attractive option to other business owners. 

Find out more about each one here: Types of Exit Strategies

Planning exit strategies for a failing business

Bankruptcy isn’t an exit that you’d find in a business plan. However, it is the last remaining exit strategy for a failing business. 

A more planned approach might be to liquidate. This involves selling everything at market value and using the revenue to pay off any remaining debt. 

For sole proprietors, walking away can be as easy as increasing your personal salary in the years preceding your exit, paying yourself bonuses, settling any debt, and then liquidating any remaining assets. Just be warned that with the larger income comes a larger tax bill.

How to prepare an exit strategy

Step 1: Determine length of involvement

The first step in business exit planning should be to ask yourself, how long do you want to stay involved in the business? If you envision your involvement being long-term, you might plan to liquidate or sell your shares. If you’re only in it for the short-term, you could merge, be acquired, or even IPO.
 

Step 2: Assess financial goals

Next, ask yourself, what are your financial goals? These will certainly impact which exit strategy you choose. 

Step 3: Identify creditors requiring payment 

Do you have investors or creditors to pay? If you do, you’ll need to make sure those are covered as part of your exit planning.

Step 4: Research different types of exits

Make sure you research the pros and cons of different types of exit strategies before you begin writing your exit plan.

Step 5: Write your exit plan

Once you’ve chosen the exit strategy for you, be sure to include detail on the following, and what will happen to them as part of the exit strategy, in your business plan. This is important for business continuity.   

• Your personal & business financials
• Your investors and stakeholders
• New leadership
• Your employees
• Your customers

Find out more about selling your business: How do you sell a business

Exit strategy business plan template

The best advice we can give you in learning how to make a business exit plan is to start early. With Ansarada Deals, you can benefit from free access to deal preparation and automation tools, with no cost to pay until the deal goes live. Put your business exit checklist to work for you in the Deals space with project management workflows, collaboration tools and Excel integrations that can streamline deal preparation for the best possible outcome.