Close this search box.

Table of Contents

Business Exit Strategy


A Business Exit Strategy is a plan that a business owner develops to sell their ownership in a company to investors or another company, or to cease operations due to lack of profitability. It’s essentially a contingency plan that helps to protect the owner’s interest in case of retirement, financial crisis, or a significant change in the market. This strategy can maximize profits on investment, ensure smooth business transition, and mitigate risks.


The phonetic pronunciation of “Business Exit Strategy” is: /ˈbɪznɪs/ /ˈɛksɪt/ /ˈstrætədʒi/

Key Takeaways

  1. Importance of Planning: An exit strategy is an essential part of any business plan. It not only prepares a company for potential sale or dissolution but also can guide business growth by establishing long-term goals and expectations. Additionally, having a well-conceived exit strategy can attract potential investors, showing them that the business has a clear plan for the future.
  2. Variety of Options: There are several types of exit strategies, and each has its own advantages and disadvantages. These can include selling the business to a third party, selling to a strategic partner or competitor, initiating an Employee Stock Ownership Plan (ESOP), passing the business on to family members, or simply closing the business down. The choice largely depends on the business’s specifics, the owner’s retirement plans, and the market conditions.
  3. Time and Value: Exit strategies should be planned well in advance to optimize the company’s value and make the exit process smoother. It can often take years to execute a successful exit strategy, especially if the goal is to sell the business at the highest possible price. Market conditions, the business’s financial performance, and industry trends all influence the timing and success of the exit strategy.


A Business Exit Strategy is a crucial aspect of a business plan because it outlines a plan for selling ownership or discontinuing a product line or division within a company. It’s important as it ensures that business owners, investors, or entrepreneurs can mitigate risks, protect their investment and enhance the value of the business in the market. It provides a clear path to realize returns, prepare for unexpected events (like retirement, illness, or financial crisis), and it’s often leveraged during negotiations with potential investors who are interested in understanding their exit opportunities. Thus, an exit strategy is an essential safeguard and potential value booster in any business lifecycle.


The main purpose of a Business Exit Strategy is to plan and define a way to sell the owner’s stake in a company, ensuring business continuity and maximizing profit or limiting losses. It gives a clear pathway to reduce or completely liquidate stake in a business venture when certain predefined objectives have been met or not met. These objectives could range from achieving a substantial financial target, mitigating unforeseen financial risks, or a business owner looking to retire. Therefore, this strategy primarily exists to protect the financial interest of the business owner, ensuring they receive their expected returns or minimize losses.The Business Exit Strategy also plays a pivotal role in business planning, as it is best developed and implemented when a business is formed and not during exit. It provides a roadmap for investors and business owners to efficiently manage company resources, keeping in mind the long-term plan. For instance, if an exit strategy involves selling the company to a larger entity, it might necessitate making business decisions that make the company more attractive to potential buyers. Hence, an Exit Strategy is not just an exit plan, but a strategic tool for guiding business growth and maximizing the company’s value.


1. **Selling to a Competitor:** In 2014, WhatsApp implemented this business exit strategy when it sold the company to Facebook for $19 billion. WhatsApp’s founders, Jan Koum, and Brian Acton decided to exit their startup by selling it to a larger company, providing them with a significant financial return on their initial investment.2. **Initial Public Offering (IPO):** In 2004, Google used the IPO exit strategy. The founders, Larry Page and Sergey Brin, decided to take the company public, selling a portion of their shares to the public. This not only helped them to amass a substantial personal fortune but also provided the company with more capital for growth and expansion.3. **Management Buyout (MBO):** A great example of this is the case of Virgin Media. In 2013, the company’s management, led by Richard Branson, bought out the company’s shares. This helped Richard Branson maintain control over the company, whilst also providing a way to repay investors.

Frequently Asked Questions(FAQ)

What is a Business Exit Strategy?

A Business Exit Strategy is a plan that outlines how a business owner or investor plans to sell their ownership stake in a company, usually after reaching certain objectives, such as maximizing profits, reducing losses, or retiring.

What are common types of Business Exit Strategies?

Common types include selling the business to a third-party, passing it down within the family, selling to co-owners or employees (Employee Share Ownership Plans or ESOPs), initial public offerings (IPOs), or liquidation.

Why is a Business Exit Strategy important?

An Exit Strategy is important because it helps business owners plan for the future, protect their investment, reduce unpredictability, and potentially maximize their return.

When should a Business Exit Strategy be planned?

Ideally, an Exit Strategy should be planned at the initial stages of the business. However, circumstances often change, so it’s important to review and revise this plan regularly.

Does every business need an Exit Strategy?

Whilst not a legal requirement, it’s generally recommended. It promotes strong future planning and ensures business continuity or an appropriate plan in case the business closes.

How is the value of a business determined for an Exit Strategy?

The value of a business can be determined using several methods, such as market capitalization, earnings multipliers, or net book value. Professional business valuation experts can also be hired to do this.

What factors influence the choice of an Exit Strategy?

Factors may include the owner’s retirement plans, the industry’s status, market conditions, the owner’s personal circumstances and the business’s financial health.

How do I choose the right Exit Strategy for my business?

It’s important to consider your personal and business goals, the nature of your business, and market conditions. Advice from professionals like financial advisors, business brokers, and lawyers can also be helpful.

Can an Exit Strategy change?

Yes, an Exit Strategy can and should be revised as your business and personal goals evolve and market conditions change.

: How does a good Exit Strategy benefit employees?

A well-planned Exit Strategy can provide job security and stability for employees and, in some cases, offer ownership opportunities through strategies like Employee Share Ownership Plans (ESOPs).

Related Finance Terms

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More