what is a business exit strategy 
a business exit strategy is an entrepreneur s strategic plan to sell his or her ownership in a company to investors or another company an exit strategy gives a business owner a way to reduce or liquidate his stake 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 entrepreneur to limit losses an exit strategy may also be used by an investor such as a venture capitalist in order to plan for a cash out of an investment business exit strategies should not be confused with trading exit strategies used in securities markets understanding business exit strategyideally an entrepreneur will develop an exit strategy in their initial business plan before actually going into business the choice of exit plan can influence business development decisions common types of exit strategies include initial public offerings ipo strategic acquisitions and management buyouts mbo which exit strategy an entrepreneur chooses depends on many factors such as how much control or involvement if any they want to retain in the business whether they want the company to be run in the same way after their departure or whether they re willing to see it shift provided they are paid well to sign off a strategic acquisition for example will relieve the founder of his or her ownership responsibilities but will also mean the founder is giving up control ipos are often seen as the holy grail of exit strategies since they often bring along the greatest prestige and highest payoff on the other hand bankruptcy is seen as the least desirable way to exit a business a key aspect of an exit strategy is business valuation and there are specialists that can help business owners and buyers examine a company s financials to determine a fair value there are also transition managers whose role is to assist sellers with their business exit strategies business exit strategy and liquiditydifferent business exit strategies also offer business owners different levels of liquidity selling ownership through a strategic acquisition for example can offer the greatest amount of liquidity in the shortest time frame depending on how the acquisition is structured the appeal of a given exit strategy will depend on market conditions as well for example an ipo may not be the best exit strategy during a recession and a management buyout may not be attractive to a buyer when interest rates are high while an ipo will almost always be a lucrative prospect for company founders and seed investors these shares can be extremely volatile and risky for ordinary investors who will be buying their shares from the early investors business exit strategy which is best the best type of exit strategy also depends on business type and size a partner in a medical office might benefit by selling to one of the other existing partners while a sole proprietor s ideal exit strategy might simply be to make as much money as possible then close down the business if the company has multiple founders or if there are substantial shareholders in addition to the founders these other parties interests must be factored into the choice of an exit strategy as well 