As a business owner, there will come a point when you’ll want to step back from your day-to-day business and eventually exit. Understanding the types of exit strategies available and the most suitable one for you is a crucial part of exit and succession planning. The type of exit strategy you choose will depend on your personal and business circumstances.
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 to plan for a smooth transition with minimal risk to the ongoing business and allow you to maximise personal profit when you as an individual, or you and your business partners, exit the business.
For successful, healthy businesses, common types of exit strategies include selling your business to a 3rd party acquirer, a management buyout (MBO), passing the business on to a family member, or an initial public offering (IPO). If a business is not doing so well, then options such as a members' or creditors' voluntary liquidation or filing for bankruptcy may be appropriate.
Importance of an exit plan
All too often we see business owners leave planning their business exit strategies until the last minute, when they’ve already made the decision to leave the business. What these business owners haven’t realised is that there is a lot more work, thought and time needed for business exit planning than they expected.
