what is an exit strategy 
an exit strategy is a contingency plan executed by an investor venture capitalist or business owner to liquidate a position in a financial asset or dispose of tangible business assets once predetermined criteria have been met or exceeded an exit strategy may be executed to exit a nonperforming investment or close an unprofitable business in this case the purpose of the exit strategy is to limit losses an exit strategy may also be executed when an investment or business venture has met its profit objective for instance an angel investor in a startup company may plan an exit strategy through an initial public offering ipo other reasons for executing an exit strategy may include a significant change in market conditions due to a catastrophic event legal reasons such as estate planning liability lawsuits or a divorce or even because the business owner investor is retiring and wants to cash out understanding exit strategiesan effective exit strategy should be planned for every positive and negative contingency regardless of the investment type or business venture this planning should be integral to determining the risk associated with the investment or business venture an exit strategy is a business owner s strategic plan to sell ownership in a company to investors or another company it outlines a process to reduce or liquidate ownership in a business and if the business is successful make a substantial profit if the business is not successful an exit strategy or exit plan enables the owner to limit losses an exit strategy may also be used by an investor such as a venture capitalist to prepare for a cash out of an investment for investors exit strategies and other money management techniques can greatly help remove emotion and reduce risk before entering an investment investors should set a point at which they will sell for a loss and a point at which they will sell for a gain who needs an exit plan business owners of both small and large companies need to create and maintain plans to control what happens to their business when they want to exit an entrepreneur of a startup may exit their business through an ipo a strategic acquisition or a management buyout while the ceo of a larger company may turn to mergers and acquisitions as an exit strategy investors such as venture capitalists or angel investors need an exit plan to reduce or eliminate exposure to underperforming investments so they can capitalize on other opportunities a well thought out exit strategy also provides guidance on when to book profits on unrealized gains 