What is an exit strategy?

Why you should have an exit plan and the benefits of a clear exit strategy

Creating a comprehensive exit plan ensures a
smooth transition, limit losses and maximise
personal wealth

What is an exit strategy?

Let's start with the basics around what exactly we mean by an 'exit strategy'. An exit strategy is a plan for how you will leave, exit or transfer ownership of your business.

The purpose of an exit strategy is to plan the transition from the point of view of you the owner, your family, your management team and your employees. The objective is for a smooth exit allowing you to minimise the impact on trade, maximise shareholder value, exit tax efficiently and minimise losses for a loss making business.

For successful, healthy businesses, common types of exit strategies include:

Selling your business to a third party
Management Buyout (MBO)
Employee Ownership Trust (EOT)
Passing the business to a family member
An Initial Public Offering (IPO)
Liquidation

Importance & benefits of an exit plan

All too often we see business owners leave planning their business exit strategies until the last minute, when they've made the decision to leave the business.

Many business owners do not appreciate that there is a lot more work, thought and time needed for business exit planning than they expected. Preparation is paramount. The age old saying “fail to prepare, prepare to fail" is true for exit planning.

There are so many benefits to planning your exit strategy early, with much of the process not only creating benefits on exit but also providing benefits whilst still running the business.

Planning for exit encourages a business owner to set goals, make plans, protect and manage assets effectively, which in turn provides further stability for long-term growth.

When you have a specific objective or goal in mind, an exit strategy can help maximise the value in your business.

The benefits of an exit plan can include:

Developing your business in preparation for exit.
Determining, increasing and achieving maximum business value.
Deciding on the right type of exit to achieve your goals.
Finding and attracting the right investors or buyers.
Building and incentivising the right team.
Protecting your assets.
Saving money through proactive tax planning.
Smooth the transition.
Minimise stress.
Achieving the exit you want.