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Comprehensive articles on every step of the process of buying or selling a business from the most exhaustive encyclopedia of M&A articles in the industry.

Business Exit Plan & Strategy Checklist | A Complete Guide

It’s not enough to merely hand over the keys at the closing. You need a strategy. An exit strategy.

An exit strategy, as the term implies, is a plan to assist you in exiting your business. All exit plans will vary, but they all contain common elements.

The three common elements that all business exit strategies should contain are:

  • A valuation of your company. The process of valuing your company involves three steps, the first being an assessment of the current value of your business. Once this value is calculated, you should plan how to both preserve and increase that value.
  • Your exit options. After you have determined a range of values for your company and developed plans for preserving and increasing this value, you can begin exploring your potential exit options. These can be broken down into inside, outside, and involuntary exit options.
  • Your team. Finally, you should form a team to help you prepare and execute your exit plan. Your team can consist of an M&A advisor, attorney, accountant, financial planner, and business coach.

If you are considering selling your business in the near future, planning for the sale is imperative if you want to maximize the price and ensure a successful transaction. This article will give you a solid understanding of these elements and how you can put them together to orchestrate a smooth exit from your business.

Table of Contents

  • Measure the Value

Preserve the Value

Increase the value, inside exit options, outside exit options, involuntary exit options, team members, the annual audit, business exit plan strategy component #1: valuation.

Your exit strategy should begin with a valuation, or appraisal, of your company. The process of valuing your company involves three steps, the first being an assessment of the current value of your business. Once this value is calculated, you should then plan how to both preserve and increase the value of your business.

Let’s explore each of these components — assess, preserve, increase — in more depth.

Assess the Value

The first step in any exit plan is to assess the current value of your business.

Here are questions to address before beginning a valuation of your company:

  • Who will value your company?
  • What methods will that person use to value your company?
  • What form will the valuation take?

Who: Ideally, whoever values your company should have real-world experience buying and selling companies , whether through business brokerage, M&A, or investment banking experience. They should also have experience selling companies comparable to yours in size and complexity. Specific industry experience related to your business is helpful, but not essential, in our opinion. There are loads of professionals out there who possess the academic qualifications to appraise your business but who have never sold a company in their lives. These individuals can include accountants or CPAs, your financial advisor, or business appraisers. It is essential that your appraiser have real-world M&A experience. Without hands-on experience buying and selling companies comparable to yours, an appraiser will be unprepared to address the myriad nuances of the report or field the dozens of questions that will arise after preparing the valuation.

Action Step: Ask whoever is valuing your business how many companies they have sold and what percentage of their professional practice is devoted to buying and selling businesses versus other activities.

What Methods: Most business appraisers perform business valuations for legal purposes such as divorce, bankruptcy, tax planning, and so forth. These types of appraisals differ from an appraisal prepared for the purpose of selling your business. The methods used are different , and the values will altogether be different as well. By hiring someone who has real-world experience selling businesses, as opposed to theoretical knowledge regarding buying and selling businesses, you will work with someone who will know how to perform an appraisal that will stand the test of buyers in the real world.

Form: Your M&A business valuation can take one of two forms:

  • Verbal Opinion of Value: This typically involves the professional spending several hours reviewing your financial statements and business, then verbally communicating an opinion of their assessment to you.
  • Written Report: A written report can take the form of either a “calculation of value” or a “full report.” A calculation of value cannot be used for legal purposes such as divorce, tax planning, or bankruptcy, but for the purpose of selling a business, either type is acceptable.

Is a verbal or written report preferable? It depends. A verbal opinion of value can be quite useful if you are the sole owner and you do not need to have anyone else review the valuation.

The limitations of a verbal opinion of value are:

  • If there are multiple owners, there may be confusion or disagreement regarding an essential element of the valuation. If a disagreement does arise, supporting documentation for each side will be necessary to resolve the disagreement.
  • You will not have a detailed written report to share with other professionals on your team, such as attorneys , your accountant, financial advisor, and insurance advisor.
  • The lack of such a detailed report makes it difficult to seek a second opinion, as the new appraiser will have to start from scratch, adding time and money to your process.

For the reasons above, we often recommend a written report, particularly if you are not planning to sell your business immediately.

We have been involved in situations in which CPA firms have valued a business but had little documentation (one to two pages in many cases) to substantiate the basis of the valuation.

In one example, the CPA firm’s measure of cash flow was not even defined; it was simply listed as “‘cash flow.” This is a misnomer as there are few agreements regarding the technical definition of this term. As a result, any assumption we might have made would have led to a 20% to 25% error at minimum in the valuation of the company. By having a written report in which the appraiser’s assumptions are documented, it is simple to have these assumptions reviewed or discussed.

Note: When hiring someone to value your company, you are paying for a professional’s opinion but keep in mind that this opinion may differ from a prospective buyer’s opinion. Some companies have a narrow range of value (perhaps 10% to 20%), while other companies’ valuations can vary wildly based on who the buyer is, often by up to 100% to 200%. By having a valuation performed, you will be able to understand the wide range of values that your company may attain. As an example, business appraisers’ valuations often contain a final, exact figure, such as $2,638,290. Such precision is misleading in a valuation for the purpose of a sale. We prefer valuations that result in a more realistic price range, such as $2,200,000 to $2,800,000. An experienced M&A professional can explain where you will likely fall within that range and why.

Once you have established the range of values for your company, you should develop a plan to “preserve” this value. Note that preserving value is different from increasing value. Preserving value primarily involves preventing a loss in value.

Your plan should contain clear strategies to prevent catastrophic losses in the following categories:

  • Litigation: Litigation can destroy the value of your company. You and your team should prepare a plan to mitigate the damaging effects of litigation. Have your attorney perform a legal audit of your company to identify any concerns or discrepancies that need to be addressed.
  • Losses you can mitigate through insurance: Meet with your CPA, attorney, financial advisor, and insurance advisor to discuss potential losses that can be minimized through intelligent insurance planning. Examples include your permanent disability, a fire at your business, a flood, or other natural disasters, and the like.
  • Taxes: You should also meet with your CPA, attorney, financial advisor, and tax planner to mitigate potential tax liabilities.

Important: The particulars of your plan to preserve the value of your company also depend on your exit options, which we will discuss below. Many elements of your exit plan are interdependent. This interdependency increases the complexity of the planning process and underscores the importance of a team when planning your exit.

Only after you have taken steps to preserve the value of your company should you begin actively taking steps to increase the value of your company.

There is no simple method or formula for increasing the value of any business. This step must be customized for your company.

This plan begins with an in-depth analysis of your company, its risk factors, and its growth opportunities. It is also crucial to determine who the likely buyer of your business will be . Your broker or M&A advisor will be able to advise you regarding what buyers in the marketplace are looking for.

Here are some steps you can take to increase the value of your business:

  • Avoid excessive customer concentration
  • Avoid excessive employee dependency
  • Avoid excessive supplier dependency
  • Increase recurring revenue
  • Increase the size of your repeat-customer base
  • Document and streamline operations
  • Build and incentivize your management team
  • Physically tidy up the business
  • Replace worn or old equipment
  • Pay off equipment leases
  • Reduce employee turnover
  • Differentiate your products or services
  • Document your intellectual property
  • Create additional product or service lines
  • Develop repeatable processes that allow your business to scale more quickly
  • Increase EBITDA or SDE
  • Build barriers to entry

Note: A professional advisor can help you ascertain and prioritize the best actions for your unique situation to increase the value of your business. Unfortunately, we have seen owners of businesses spend three months to a year on initiatives to increase the value of their business, only to discover that the initiatives they worked on were unlikely to yield any value to a buyer.

Business Exit Strategy Component #2: Exit Options

After you have determined a range of values for your company and developed plans for preserving and increasing this value, you can begin exploring your potential exit options.

Note: These steps are interdependent. You can’t determine your exit options until you have a baseline valuation for your company, but you can’t prepare a valuation for your business until you have explored your exit options. A professional can help you determine the best order to explore these steps, or if the two components should be explored simultaneously. This is why real-world experience is critical.

All exit options can be broadly categorized into three groups:

  • Inside: Buyer comes from within your company or family
  • Outside: Buyer comes from outside of your company or family
  • Involuntary: Includes involuntary situations such as death, divorce, or disability

Inside options include:

  • Selling to your children or other family members
  • Selling to your business to your employees
  • Selling to a co-owner

Inside exits require a professional who has experience dealing with family businesses, as they often involve emotional elements that must be navigated and addressed discreetly, gracefully, and without bias. Inside exit options also greatly benefit from tax planning because if the money used to buy the company is generated from the business, it may be taxed twice. Lastly, inside exits also tend to realize a much lower valuation than outside exits. Due to these complexities, most business owners avoid inside exits and choose outside options. Fortunately, most M&A advisors specialize in outside exit options.

Outside exit options include:

  • Selling to a private individual
  • Selling to another company or competitor
  • Selling to a financial buyer, such as a private equity group

Outside exits tend to realize the most value. This is also the area where business brokers, M&A advisors, and investment bankers specialize.

Involuntary exits can result from death, disability, or divorce. Your plan should anticipate such occurrences, however unlikely they may seem, and include steps to avoid or mitigate potential adverse effects.

Business Exit Strategy Component #3: Team

Finally, you should form a team to help you plan and execute your exit plan. Many of these steps are interdependent — they are not always performed sequentially, and some steps may be performed at the same time. Forming a team will help you navigate the options and the sequence.

Your team should involve the following:

  • M&A Advisor/Investment Banker/Business Broker: If you are considering an outside exit.
  • Estate planning
  • Financial planning
  • Tax planning, employee incentives, and benefits
  • Family business
  • Accountant/CPA: Your accountant should have experience in many of the same areas as your attorney, along with audit experience and retirement planning. Again, it is unlikely that your CPA possesses all of the skills you need. If further expertise is needed, the CPA should be able to access the skills you need, either through colleagues at their firm or by referral to another accountant.
  • Financial Planner/Insurance Advisor: This team member is critical. We were once in the late stages of a sale when the owner suddenly realized that, after deducting taxes, his estimated proceeds from the sale would not be enough to retire on. An experienced financial planner can help with matters like these. They should have estate and business continuity planning experience, as well as experience with benefits and retirement plans.
  • Business Coach: A business consultant or coach may be necessary to help implement many of the changes needed to increase the value of your business, such as building infrastructure and establishing a strong, cohesive management team. Doing this often requires someone who can point out your blind spots. A coach can help you take these important steps.

Where to find professionals for your team

The best way to find professionals for your team is through referrals from trusted friends and colleagues who have personally worked with the professional in question. Don’t ignore your intuition, however. It’s important that you and your team members have good chemistry.

We recommend that you assemble your professional advisors for an annual meeting to perform an audit of your business. The goal of this audit is to prevent and discover problems early on and resolve them. As the saying goes, “An ounce of prevention is worth a pound of cure.”

Your advisors are a valuable source of information. This annual meeting is an opportunity to ensure that they’re all on the same page and that there are no conflicts among your legal, financial, operational, and other plans. An in-person or virtual group meeting enables you to accomplish this quickly and efficiently.

A sample agenda might include a review of the following:

  • Your operating documents
  • New forms of liability your business has assumed
  • Any increase in value in your business and changes that need to be made, such as increases in insurance or tax planning
  • Capital needs
  • Insurance requirements and audit, and review of existing coverages to ensure these are adequate
  • Tax planning — both personal and corporate
  • Estate planning — includes an assessment of your net worth and business value, and any needed adjustments
  • Personal financial planning

If you are contemplating selling your business, creating an exit plan will answer these critical questions:

  • How much is my business worth? To whom?
  • How much can I get for my business? In what market?
  • How much do I need to make from the sale of my business to meet my goals?

Taking the strategic steps discussed in this article — assembling a stellar professional team and optimizing the team’s collective experience — will get you well on your way toward successfully selling your business and turning confidently toward your next adventure.

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Exit Strategies - All You Need to Know about Business Exit Planning

exit plan stage business

Kison Patel is the Founder and CEO of DealRoom, a Chicago-based diligence management software that uses Agile principles to innovate and modernize the finance industry. As a former M&A advisor with over a decade of experience, Kison developed DealRoom after seeing first hand a number of deep-seated, industry-wide structural issues and inefficiencies.

exit plan stage business

The question, “What is your exit plan?” tends to draw blank expressions when asked to business owners.

A survey of business owners conducted by the Exit Planning Institute shows that a startling 2 out of 10 businesses that are listed for sale eventually close a transaction, and of these, around a half end up closing only after significant concessions have been made by the seller.

Business owners need to think about exit planning before searching for potential buyers. The tools provided by DealRoom can be a valuable asset to any business owner looking to develop an exit strategy.

By working with a team of professional advisors, accountants, lawyers, and brokers, you can ensure the right documents are in place for a business exit whenever the time comes.

In this article, we talk about creating a business exit plan and how to make one for your business.

What is a Business Exit Strategy?

A business exit strategy outlines the steps that a business owner needs to take to generate maximum value from selling their company. A well-designed business exit strategy should be flexible enough to allow for unforeseen contingencies and account for the fact that business owners don’t always decide on their own terms when to exit. By creating a strategy in advance, owners can ensure that they can at least maximize value in the event of an unplanned exit from the business.

What is a Business Exit Strategy?

Investor exit strategy

An investor exit strategy is similar to that of a business exit strategy. However, investors look for a financial return on their exit from a company, so bequeathing is never one of the options considered. An investor will often have a list of potential acquirers in mind, as well as a timeframe, as soon as their investment is made. In this type of scenario, there is often an exit multiple in mind (i.e. a multiple of EBITDA or a multiple of the original investment made in the business).

Venture capital exit strategy

Another business exit strategy option is a venture capital exit strategy. As our article on venture capital outlines, if a company is venture funded then consider that your investor will have a pre-planned exit. As an early stage company, this is a natural part of taking investments. Usually, with a VC investment, the aim is for an exit after five years, either through an industry sale or an IPO, where they can liquidate their original equity investment.

Motives for Developing Exit Strategies

Technically, it is important for equity owners to have a broad outline of what an exit would look like. For example, the image below represents various motives ranging from financial gain to mitigating environmental risk.

Common Motives for Developing Exit Strategies

Some of the common motives for business exit include the following:

Retirement - Arguably the most common reason of all motives is retirement. Business owners will inevitably retire at some stage, and it’s best that they have an exit strategy in place before doing so.

Investment return - A business exit strategy as part of a wider investment strategy - for example, the VC company planning to go to IPO after five years - makes the exit valuation part a component of the initial investment in the business.

Loss limit -A business exit is ultimately a kind of real option for a business. If the business is hemorrhaging money, the best option may be to exit immediately - ‘cutting your losses’ on the business, a sit was.

Force majeure - Like the examples of Covid-19 and Russia’s invasion of Ukraine, sometimes an investor or owner doesn’t really have a choice: The circumstances dictate that they have to exit.

Types of Exit Strategies

Types of Exit Strategies

Sale to a strategic buyer

Strategic buyers are usually in the same industry as the company whose owner is looking to exit. And in other cases, the buyer can be in an adjacent market looking to compliment their products in an existing market, or expansion of their products into a market.

Sale to a financial buyer

Financial buyers are solely looking for a financial return from their investment in a business and the exit is the primary means of achieving this return. Examples include venture capital and private equity investors.

Initial Public Offering (IPO)

This form of exit, far more common with startups than mature companies, enables company owners to exit by selling their equity to investors in public equity markets.

Management buyout (MBO)

An exit through MBO would occur when the owner sells the company to its current management team, whose familiarity with the business technically should make them the best candidates to achieve value from an acquisition.

Leveraged buyout (LBO)

A leveraged buyout occurs when a buyer takes a loan or debt to purchase another company. The buyer also uses a combination of their assets and the acquired company's assets as collateral. Financial models can be used for multiple scenarios and simulations of when an LBO is an effective choice.

Liquidation

Liquidation can be used by a business owner to exit if they feel like the liquidation would yield cash faster or that the individual assets (i.e. property, plant, and equipment) of the business were more liquid than the business as a going entity.

Exit Strategy for Startups

Startups looking for VC investment can include an exit strategy as part of their initial pitch. It is not mandatory. Sometimes this can work when well, for example, when a startup founder is well versed in the industry and has a credible 5-year forecast.

Startup exit strategies depend on a few different factors:

Market timing

How have IPOs for startups performed in the past 12-18 months? If public markets are showing enthusiasm for companies like the one being pitched, it makes it easier to show how an exit can occur.

Comparable transactions

Similar to IPOs, companies can use comparable transactions (industry or private equity sales) to show investors their route to an exit. The comparable firms should be operating in the same or close to the same competitive space.

How to Put Together a Business Exit Plan

Remember that the purpose of the plan is to make the new business owner transition as straightforward as possible.

Although the steps which follow are general, nobody knows a business better than its owner, so take whatever steps are necessary to make your business as marketable to potential buyers as possible.

These steps also assume that you, the owner of a business, have weighed up the options elsewhere. Personal finances, family situations, and other career options are beyond the scope of this article.

Rather, the intention of the points below is to ensure that a business will be ready to sell in the fastest possible time at a fair price.

Business exit plan

  • Know the business
  • Ensure that finances are in order
  • Pay off creditors
  • Remove yourself from the business
  • Create a set of standard operating procedures
  • Establish (and train) the management team
  • Draw up a list of potential buyers

1. Know the business

This sounds obvious but a business can lose focus quickly in the aim of diversification, to the extent that it becomes ‘everything to every man.’

This may be useful in the short-term for revenue streams, but just be sure that your business has focus. It will help you find the right buyers when the time comes and to be able to communicate which part of the market your business occupies.

2. Ensure that finances are in order

This should be a priority regardless of any future business plans.

But if you intend to sell your business at short notice, it's best to have a clean, well-maintained set of financial statements going back at least three years.

3. Pay off creditors

The less debt that a business holds on its balance sheet, the more attractive it will be to potential buyers.

A common theme among small business owners in the US is thousands of dollars of credit card debt. This can be a red flag to many buyers and should be paid off as soon as possible.

4. Remove yourself from the business

How important are you to the day-to-day operations? If your business would lose more than 10% of its revenue were you to leave, the answer is “too important.”

If revenues are tied to the owner, buyers are not going to want to buy the business if the owner is going to leave right after.

Although it can be a challenge, seek to minimize your direct impact on the business, in turn making it more marketable.

5. Create a set of standard operating procedures

Closely related to the above point, ensure that your business has a set of standard operating procedures (SOPs), ideally in written form, that would allow any owner to maintain the business in working order merely by following a set of instructions.

6. Establish (and train) the management team

Are the existing managers capable of taking over the business and running it as is? If you leave the business for a vacation and one of your managers calls you several times, the answer to this question may be ‘no’.

They may need more training, or you may need a different set of managers. In either case, having a capable team in place will be valuable whether you decide to exit your business or not.

7. Draw up a list of potential buyers

A list of buyers should be made and refreshed on a reasonably regular basis. Ideally, you would know their criteria for buying a business, but this is not always practical.

Keeping a long list of buyers means that you can reach out to them at short notice if it is  required at some point in the future.

This list is likely to include at least some of your managers or suppliers.

Importance of Exit Strategy

Many owners make the mistake of thinking that a business exit plan means the same thing as a ‘retirement plan’, believing that they can start thinking about putting one together as soon as they hit 55 years of age.

This is an error. Not because your departure is impending, but because it doesn’t give you the flexibility.

Instead of looking at a business exit plan as a retirement plan, rethink it as a divestment option.

An alternative way of thinking about this is, what happens to the business owner that doesn’t have an exit strategy? Think of the value destruction that occurs to the business if something unexpected happens and the owner has to make an unplanned sale, at a discount, in unattractive market circumstances, or even at a time of personal loss.

Instead of thinking about the business exit as something that will happen in the future, rethink it as something that could happen at any moment.

Exercising critical thinking to write a business exit strategy can be exciting as well as enlightening. Thinking of an exit as an end state is not the best approach since this limits businesses to a strict definition. Rather, consider how the process can be supportive of a business' growth strategy. Take these top three considerations:

  • Financial considerations: If the exit strategy has a target revenue number in 5 years then how will the business get there? What financial dashboards are needed to properly run the company? How will expenses be managed so a business does not outspend against earnings?
  • Supply chain considerations: What products will need to be in your catalog to maximize margins? What inventory turns ratio are you aiming for on a monthly basis?
  • People considerations: Who do I hire to grow the company exponentially? What benefits do I offer to attract the best talent but don't cause complications at the exit? How do I write the force majeure so I protect the company and employees?

A business's primary goal is long-term value generation to its customers, itself, and its stakeholders. Having a thoughtful exit strategy shows the maturity of a business's Leadership towards longevity and value creation. There are many facets of the journey from owner motivation to financial strategies.

At DealRoom we help the owners of businesses of all sizes prepare for this eventuality. Our Professional Services team is ready to help businesses think through these details. It is important that an exit strategy be a journey throughout the growth stages.

Talk to us about how our tools can be an asset for you in your exit plan.

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Start » strategy, ready to move on how to create an exit plan for your business.

Exit plans are necessary to secure a business owner’s financial future, but many don’t think to establish one until they’re ready to leave.

 Two coworkers looking at tablet as they walk through an office hall.

An exit strategy is an important consideration for business owners, but it’s often overlooked until significant changes are necessary. Without planning an exit strategy that informs business direction, entrepreneurs risk limiting their future options. To ensure the best for your business, plan your exit strategy before it’s time to leave.

What is an exit strategy?

An exit strategy is often thought of as the way to end a business — which it can be — but in best practice, it’s a plan that moves a business toward long-term goals and allows a smooth transition to a new phase, whether that involves re-imagining business direction or leadership, keeping financially sustainable or pivoting for challenges.

A fully formed exit strategy takes all business stakeholders, finances and operations into account and details all actions necessary to sell or close. Exit strategies vary by business type and size, but strong plans recognize the true value of a business and provide a foundation for future goals and new direction.

If a business is doing well, an exit strategy should maximize profits; and if it is struggling, an exit strategy should minimize losses. Having a good exit strategy in practice will ensure business value is not undermined, providing more opportunities to optimize business outcomes.

[Read more: What Is a Business Valuation and How Do You Calculate It? ]

Benefits of an exit strategy

Planning a complete exit strategy well before its execution does more than prepare for unexpected circumstances; it builds purposeful business practices and focuses on goals.

Even though a plan may not be used for years or decades, developing one benefits business owners in the following ways:

  • Making business decisions with direction . With the next stage of your business in mind, you will be more likely to set goals with strategic decisions that make progress toward your anticipated business outcomes.
  • Remaining committed to the value of your business . Developing an exit strategy requires an in-depth analysis of finances. This gives a measurable value to inform the best selling situation for your business.
  • Making your business more attractive to buyers . Potential buyers will place value in businesses with planned exit strategies because it demonstrates a commitment to business vision and goals.
  • Guaranteeing a smooth transition . Exit strategies detail all roles within a business and how responsibilities contribute to operations. With every employee and stakeholder well-informed, transitions will be clear and expected.
  • Seeing through business — and personal — goals after exit . Executing an exit strategy that’s right for your business’s value and potential can prevent unwanted consequences of exit, like bankruptcy.

Because leaving your business can be emotional and overwhelming, planning a proper exit strategy requires diligence in time and care.

Weighing your options: closing vs. selling

There are two strategies to consider for your exit plan.

Sell to a new owner

Selling your business to a trusted buyer, such as a current employee or family member, is an easy way to transition out of the day-to-day operations of your business. Ideally, the buyer will already share your passion and continue your legacy.

In a typical seller financing agreement, the seller will allow the buyer to pay for the business over time. This is a win-win for both parties, because:

  • The seller will continue to make money while the buyer can start running the show without a huge upfront investment;
  • The seller may also remain involved as a mentor to the buyer, to guide the overall business direction; and
  • The transition for your employees and customers will be a smooth one since the buyer likely already has a stake in the business.

However, there are downsides to selling your business to someone you know. Your relationship with the buyer may tempt you to compromise on value and sell the business for less than what it’s worth. Passing the business to a relative can also potentially cause familial tensions that spill into the workplace.

Instead, you may choose to target a larger company to acquire your business. This approach often means making more money, especially when there is a strong strategic fit between you and your target.

The challenge with this option is the merging of two cultures and systems, which often causes imbalance and the potential that some or many of your current employees may be laid off in the transition.

[Read more: 5 Things to Know When Selling Your Small Business ]

Liquidate and close the business

It’s hard to shut down the business you worked so hard to build, but it may be the best option to repay investors and still make money.

Liquidating your business over time, also known as a “lifestyle business,” works by paying yourself until your business funds run dry and then closing up shop.

The benefit of this method is that you will still get a paycheck to maintain your lifestyle. However, you will probably upset your investors (and employees). This method also stunts your business’s growth, making it less valuable on the market should you change your mind and decide to sell.

The second option is to close up shop and sell assets as quickly as possible. While this method is simple and can happen very quickly, the money you make only comes from the assets you are able to sell. These may include real estate, inventory and equipment. Additionally, if you have any creditors, the money you generate must pay them before you can pay yourself.

Whichever way you decide to liquidate, before closing your business for good, these important steps must be taken:

  • File your business dissolution documents.
  • Cancel all business expenses that you no longer need, like registrations, licenses and your business name.
  • Make sure your employee payment during closing is in compliance with federal and state labor laws.
  • File final taxes for your business and keep tax records for the legally advised amount of time, typically three to seven years.

Steps to developing your exit plan

To plan an exit strategy that provides maximum value for your business, consider the six following steps:

  • Prepare your finances . The first step to developing an exit plan is to prepare an accurate account of your finances, both personally and professionally. Having a sound understanding of expenses, assets and business performance will help you seek out and negotiate for an offer that’s aligned with your business’s real value.
  • Consider your options . Once you have a complete picture of your finances, consider several different exit strategies to determine your best option. What you choose depends on how you envision your life after your exit — and how your business fits into it (or doesn’t). If you have trouble making a decision, it may be helpful to speak with your business lawyer or a financial professional.
  • Speak with your investors . Approach your investors and stakeholders to share your intent to exit the business. Create a strategy that advises the investors on how they will be repaid. A detailed understanding of your finances will be useful for this, since investors will look for evidence to support your plans.
  • Choose new leadership . Once you’ve decided to exit your business, start transferring some of your responsibilities to new leadership while you finalize your plans. If you already have documented operations in practice in your business strategy, transitioning new responsibilities to others will be less challenging.
  • Tell your employees . When your succession plans are in place, share the news with your employees and be prepared to answer their questions. Be empathetic and transparent.
  • Inform your customers . Finally, tell your clients and customers. If your business will continue with a new owner, introduce them to your clients. If you are closing your business for good, give your customers alternative options.

The best exit strategy for your business is the one that best fits your goals and expectations. If you want your legacy to continue after you leave, selling it to an employee, customer or family member is your best bet. Alternatively, if your goal is to exit quickly while receiving the best purchase price, targeting an acquisition or liquidating the company are the optimal routes to consider.

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Why Every Business Owner Needs an Exit Strategy

Table of contents.

Mark Fairlie

You wrote a business plan to launch your company. To say goodbye to it, you need an exit plan to get the maximum possible return and to limit any future exposure to what happens to the company after your departure. But years of experience teach you that nothing in business is predictable — and that’s why you need two exit plans.

Why every business owner needs an exit strategy

Today, most business brokers and advisors recommend incorporating a thorough exit strategy into your business planning from the very start. While it may seem counterintuitive to plan on starting or buying a business and simultaneously plan how you’re going to sell or remove yourself from it, this is the smartest move you can make in today’s fast-paced economy.

Here are some of the benefits of developing an exit strategy.

Gives you an end goal 

If you don’t know where you’re going, you’ll never know when you get there. An exit strategy helps define what success is for you and provides you with a timetable complete with milestones toward your exit.

Informs strategic decision-making  

Without a plan, it’s easy to get caught up working “for” the business, and resolving day-to-day issues. With a firm end game in mind, you have the vision to work “on” the business instead, planning and executing the strategies you need to achieve the ultimate end goal you’ve set for yourself.

Enhances the value of the business

If you don’t have an exit plan, your business will have some inherent value when you look to change ownership, but this is often the baseline value. With an exit strategy where you have a clear end goal in mind, your business is worth more to potential buyers or investors. You’ve grown it, locked its profitability, trained a strong management team, established a customer base, cemented meaningful supplier relationships and, most importantly, structured the business to operate independently of your personal involvement. That is valuable.

Provides a flexible template 

At some point, you will likely need to make adjustments to your exit strategy. Sometimes, that will be for business reasons. Other times, something unexpected and unwanted like a sudden death, divorce, major health problem or required relocation may force you to change course. It’s easier to revise and tweak a plan that already exists with clear objectives and milestones than to come up with one suddenly to cope with a sudden change.

Having a preexisting strategy makes managing unforeseen events simpler. That’s because you already have a way of making decisions for growth — one that’s got you to where you are. You can strengthen this by involving outside professional advisors like a business broker, attorney and accountant to help you course correct when necessary and to monitor progress against your goals. 

Why you need 2 exit strategies

Creating one exit strategy may seem daunting enough, but to cover your bases, you should craft two different plans: one for a voluntary exit and one for an involuntary exit.

With a voluntary exit strategy, you’ll know the following:

  • When you want to leave:  Maybe it’s in five years, 10 years or when revenue hits $10 million.
  • Who you want to take over the business:  It could be a brand-new owner, your current management or a family member.
  • How much money you want to leave with:  Perhaps you’d like a lump-sum payment, a share of profits every month for the rest of your life or a mixture of both.
  • What to do if you’re approached by a potential buyer:  How will you react if you’re contacted out of the blue? More business owners today are receiving unsolicited buyout offers than in years past.

But things don’t always go the way you expect them to, so you need a plan for that as well. With an involuntary exit strategy, you’ll know what to do in the following situations:

  • You fall ill and you’re not able to work in the way you used to (or at all):  You need to know who’ll take the reins and make decisions and you need to train them now so the business is ready.
  • Your business begins to fail financially:  You need to know which employees and assets you can jettison so you can stay solvent and in business.
  • You burn out and just can’t take it anymore:  If it’s all getting to be too much, you need to look after yourself. Do you hang in there, appoint a successor for day-to-day overall management or look to sell up? A well-defined involuntary exit strategy can lead the way.

The best way to plan for leaving your business for good is to prepare as if you have to leave it involuntarily.  That might sound strange, but the situations that lead to voluntary and involuntary exits have a lot in common. For example, in either scenario, you need to do the following:

  • Train people to run the company in your absence:  If you want to sell up, the person who wants to buy it probably won’t want to run the company day to day. If they know your business is not owner-reliant, this is a massive selling point. Meanwhile, if you fall ill or burn out, it’s a big comfort knowing your staff can keep the business operational so it can continue flourishing.
  • Know which assets and staff to cut to survive:  This is not only a way for you to reduce costs when business is suffering. It’s also a road map for a new owner looking to streamline operations and make more money from their investment.
  • Sell off nonvital assets quickly for cash:  A new owner will want to know they can sell certain assets to offset some of the amount they paid you to take over the business. If you’re managing a crisis and need cash, you need to know which assets you can sell (or refinance) to bring money into your account.

With two exit plans in place, you have more bases covered, and you can carry out strategies that benefit both you and the new ownership.

Don’t think of an exit strategy as something for the short term. It might take five or 10 years for a successful exit strategy to reach its end. This is all about being ready to leave your business on your terms whenever the time comes.

What an exit strategy involves

Developing a well-rounded exit strategy entails the following.

Knowing when you want to leave

For your voluntary exit strategy, set yourself a date in the future by which you want to achieve your ultimate goals. These milestones could be based on metrics like company revenue and profitability. Decide on whether you’ll still proceed with a sale if you’re not successful in hitting those targets.

When you have a fixed date of departure in mind, your approach to running the business changes. You now think long-term as well as short-term because you’ll constantly be looking for ways to not only improve profitability but also build more value in your business to make it as attractive as possible to potential buyers.

Discovering who your most likely buyers are

Try to come up with “buyer personas” — documents that detail the type of person or company that would want to buy your business and why. (These are similar to customer personas , which are developed to identify your ideal customer.) To get your wheels turning, look below at potential buyers for four very different types of businesses.

Think about what specific aspects of your business will be valuable to buyers. Consider how you’ll develop and showcase those assets to increase the appeal and value of your company at the point of exit.

Developing assets that are valuable to other businesses

Sometimes, your company’s real value may be hidden behind your North American Industry Classification System (NAICS) Code. Don’t limit your company’s selloff potential by only considering buyers in your specific field.

Consider this example: You’re an e-commerce retailer and you’ve developed custom software that places your products in prominent search positions on third-party sales platforms. That, of course, would have great value for a purchaser from your sector. But it may have much greater value to a technology company and you could make a lot more money selling or licensing that software than doing a traditional sale to a competitor. Another benefit is that you could sell or license this software to raise cash if your company falls on hard times and needs money quickly. 

Improving performance in your business

Keep finding areas of improvement across your business. If you have developed custom software, as mentioned above, continue to develop it with your own needs in mind first but also consider what other companies would need to make them want to rent from you.

Look at new ways to get more people to your website or your premises every month with each visit costing you less. For instance, consider changing suppliers if you’re offered a similar quality product or service that does the job for a lower price. Ask yourself what you need to do to get that package to your customer in three days instead of four.

Another great way to build value is to do a competitor analysis. Investigate the competition in your market. Where are they doing better than you and how can you match or beat them?

Chasing profitable growth

Be experimental and creative in your advertising and keep tweaking every campaign to find wins like a drop in cost per sale or conversion. If you can prove to a potential buyer that by spending $1 on this campaign, you get $10 in revenue back and that’s been the case for years, that has tremendous value.

Promote deals to customers through  email marketing campaigns  and  short message service messaging and aim to make as much money as you can on each sale. Think of your future buyer when pricing up and chasing new business.

Doing everything you can to keep customers loyal

Don’t use the client email addresses and phone numbers you’ve collected just to move inventory; use them to  grow customer loyalty . 

Let customers know about a new product before it goes live on your website and give them the first opportunity to buy it. Send emails asking repeat clients to recommend you in online reviews. When someone does, give them a shoutout on social media and offer them a present as a thank you.  [Learn the  importance of social media for small businesses .]

Use  customer tracking tools  to work out the annual and lifetime value of each customer. Buyers look for those types of numbers. They also like companies with lots of clients who have given permission to receive emails and texts.

Customer loyalty is also key in any involuntary exit plan. If a crisis arises, you can attract regular clients and raise money quickly with a one-time sale. For example, if you sell subscription services, offer a special annual deal to existing customers to generate an influx of cash.

According to Bain & Company , customers spend 67 percent more in their 31st to 36th months as a loyal patron than in the first six months. Customer relationship management software can help you nurture these relationships. See our review of the Freshworks CRM for an example.

Handing over responsibilities to employees

The hardest types of businesses to sell are mom-and-pop shops and one-man bands. To a buyer, it’s like buying a job, not a company. It’s also really hard to sell businesses where there are 10 to 20 employees but success is still the responsibility of the owner. That’s because it’s like buying the job of a senior manager.

Delegate an increasing number of responsibilities to your employees over time. Train them and trust them to take on key tasks. If they make a mistake, be there to help them fix it and build up their confidence. If you don’t delegate, you’re training helplessness instead of anything valuable.

If a buyer asks, “Have you spent time away from the business?” you want to be able to confidently and truthfully say something like, “I spent three months in Hawaii and got one update email from the team a week. Everything ran like clockwork.”

For an involuntary exit plan, knowing you can step away for a while and still draw money thanks to your responsible staff gives comfort if you’re suffering from ill health or burnout.

Paying down company debt

You should try to pay down as much company debt as possible. That’s because when one company takes over another, things like business equipment loans and factoring service agreements cannot be novated.

In other words, they have to be settled in full on “completion day” (the day you sell your business). Normally, whatever you owe creditors is subtracted from the agreed-upon price you sell your company for, so you want to have less debt to subtract. Paying down debt also reduces your monthly servicing bills, meaning more profit in the meantime.

Reducing debt should be part of your involuntary exit plan too. You can sell unneeded or unwanted assets to pay down outstanding bills.

Starting to save money

Selling your business costs a lot of money. There are lawyers’ fees, accountant fees, professional service fees, a commission to your broker and more. For a business with $1 million in annual revenue, expect to pay up to $150,000 for a successful sale. If a deal is agreed to but falls through, you’ll still have to pay your team of outside advisors and experts.

If your business is struggling financially, having a decent amount of money saved up gives you more time to delegate day-to-day tasks to staff and raise cash by selling assets. If you also shrink your payroll and look for other savings, this will buy you even more time, financially speaking.

Exit strategies for startups vs. established businesses

There are dozens of ways for owners and investors to exit their businesses; however, the path chosen often depends on the age and size of the company.

Exit strategies for startups

  • Initial public offerings (IPOs): IPOs are the favored way for many startup business owners to divest themselves, especially tech businesses that have already gone through a few rounds of funding. When you opt for an IPO, your business becomes a publicly traded and you and your investors should all make substantial returns. Bear in mind there are many regulation and governance hurdles to jump in preparation for an IPO.
  • Strategic acquisitions: Most times, startup business owners end up selling their companies to larger competitors in the same or a related industry. You sell the shares in the business to your acquirer and this results in a complete transfer of ownership. Quite often, startups are bought for some aspect of their business that is unique and valuable, not necessarily due to their levels of profitability or market share. 
  • Management buyouts (MBOs) : In an MBO, a team consisting primarily of your current management raises the money to buy you out. Returns for owners on MBOs can be good but are generally not as high as a strategic acquisition. Still, MBOs are an excellent way of ensuring the company remains in capable hands.

Exit strategies for established businesses

  • Merger or acquisition: For established businesses with good profitability and an impressive market share, you can merge with or be acquired by another company. Businesses are often valued at multiples of annual profit and the higher your turnover and profitability, the greater the multiple you’re likely to receive. If you want to stay involved with your business after a merger, you can make it a condition of the sale that you stay on the board of the business you’re selling and/or have a seat on the board of the merged company.
  • Liquidation: If you wish to exit the business on a faster timeline than it takes to find a buyer, liquidation is an option. You sell all your assets and settle all your existing debts, allowing you to extract the remaining residual value from your business as income. While quick, it’s much less lucrative than a sale or merger in most cases.
  • Bankruptcy: If your business is facing insurmountable debts, you have two choices. First, there’s Chapter 11 bankruptcy, which keeps your doors open while you restructure your debt. Second, there’s Chapter 7 bankruptcy, which allows you to settle company debts by selling off your assets. This is a tough decision to make, but bankruptcy can relieve many financial burdens your company is suffering, giving it a chance to do business again in the future. There are a few specialist venture capitalist and private equity firms that specialize in purchasing bankrupt or near-bankrupt companies too.
  • Spin-offs: If your business has several operating divisions, whether distinguished by geography, activity or both, you could spin them off into separate entities and sell them to realize their value. This way, you receive a payout and reduce the size of the operations you’re responsible for.

Word of caution

Beware of earn-outs. With an earn-out, you receive part of the agreed price for your company now and the remainder in tranches over a period of time based on the business’s continued performance.

It is perfectly normal not to receive your asking price in one go. However, if you agree that what you’re paid will be linked to the performance of the business once you’re no longer in control of it, you’ll be putting yourself in grave danger of not getting all the money you’re expecting.

Tips for executing an exit strategy

Now that you know what creating an exit strategy involves and how exits can differ for startups versus established businesses, follow these tips when executing your plans.

1. Bring in outside expertise.

You need to build your own professional team for the sales process because your buyer will almost certainly have one. You want to level the field as much as possible, but you also want people on your side who know the intricacies of selling companies.

Consider hiring part-time chief financial officers or fractional chief marketing officers well before you put your company on the market. Bring experienced, proven talent with wider connections in the business world to your C-suite to help you improve the organization first. They’ll be invaluable in helping you carry out your exit strategy when a deal is on the table.

These same professionals will have proven themselves adept at crisis management in their careers too. They’ll be able to help you get out of awkward financial situations and train your workers to handle management responsibilities.

2. Keep your accounts up to date and your accountants close.

Inform your accountants that you want to be in a permanent state of readiness in case you receive a purchase offer out of the blue or decide to put your company on the market. Once you’ve identified the financial areas of greatest interest to your buyer type, make sure your accountant updates the company’s finance reports on a weekly or monthly basis and keeps historical records of them. The  best accounting software  will come in handy.  [Related article:  How to Hire the Right Accountant for Your Business ]

3. Hire a corporate lawyer.

Retain a lawyer, preferably one with mergers and acquisitions (M&A) experience. Your buyer’s corporate lawyers will vigorously defend their interests and try to use the information you provide about your business during the due diligence process to bring down the selling price. You need someone on your team to advocate on your behalf.

4. Hire a business broker and M&A advisor.

Opinions differ on the effectiveness of business brokers and M&A advisors for companies with an annual revenue of less than $1 million. If you’re confident enough, it might be worth forgoing an advisor and handling the process yourself.

But what does a broker do? They market your business in many ways, often on websites like businessesforsale.com. They also handle initial inquiries, verify potential buyers have the required funds to purchase your company and sit in on the negotiations over price. Many try to engineer a bidding situation where two or more interested buyers make offers at the same time to try to drive up the price.

Brokers often also intervene during the due diligence stage. During due diligence, the buyer’s professional team of lawyers and accountants will ask for lots of detailed information about your company, often over a period of between three and six months. Their job is to help the buyer understand exactly what it is they’re buying. Tempers often become fraught during due diligence for a variety of reasons. When this happens, the brokers often act as go-betweens to smooth relations and keep the deal on track.

5. Create your own data room.

In years past, a buyer’s lawyer would enter a private room at your lawyer’s office called a “data room.” Here, they’d inspect financial and employment records, as well as documentation regarding intellectual property ownership and previous and ongoing legal disputes. Most data rooms are now virtual and the professional teams acting for the buyer and the seller usually email documentation to each other.

Create your own online data room as soon as you can and ask your accountants, lawyers and managers to submit updated reports every month. Delays in providing information can upset buyers — something you want to keep to a minimum.

You don’t need to cure all the imperfections in your company before putting it on the market. A common myth among sellers is that buyers want spotless, perfectly run businesses. They don’t. All they want is a company they can add value to and they expect a certain degree of imperfection.

Running your business like nothing else is happening

Once you’ve settled on an exit strategy for your business, don’t spend any more than 30 minutes per day on it, even if you have a deal on the table and it’s going through due diligence. Concentrate on running your business as well as possible to retain and build on the value you’ve already created. Buyers will expect this and they’ll be able to monitor if you’re protecting their interests from the updated information in the data room. Proceeding with business as usual while simultaneously preparing for the future is the best way to be ready for a voluntary or involuntary exit.

Bruce Hakutizwi contributed to this article.

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How to Create an Exit Strategy Plan

exit plan stage business

In order to capture and share the critical information regarding your exit plan in an organized and easy-to-reference format, I recommend an approach like the one used by the increasingly popular business model canvas (BMC). 

The BMC is a lean startup template. It depicts in a simple, yet highly informative visual layout the nine essential building blocks of a business model: customer segments , value propositions, channels , customer relationships , revenue streams, key resources, key activities, key partnerships and cost structure. This brings us to what I call the exit strategy canvas (ESC) as a template for your exit plan. 

The main goal of the ESC is to document the essential building blocks of your exit strategy and create a shared language for communicating and iterating on your exit plan. I recommend that you lay out the ESC on one page to focus on what is absolutely critical and essential. 

I recommend that you include the following essential building blocks in your ESC.

6 Essential Building Blocks of an Exist Strategy

  • Success definition : What would a successful exit look like? 
  • Core hypotheses : What do you have to believe to be true for a successful exit to happen? 
  • Strategic opportunities : What are key areas for value creation through partnerships? 
  • Key acquirers : Who are your potential acquirers, and what are your selection criteria? 
  • Risks and challenges : What can jeopardize a successful sale to an acquirer? 
  • Key mitigants : What can you do to improve your chances of a successful sale? 

Success Definition 

The entire exit strategy is worthless unless it is crystal clear to all involved what specific outcome an exit is intended to achieve. Once everyone understands the destination, then they can support the journey. 

For many entrepreneurs, a successful exit is one that ensures the survival of their startup. And this survival is all about the continuation of what lies at the heart of a startup’s core values and what the founding team considers to be a part of their personal legacy. That may consist of taking its products from a regional offering to the national or global level, creating new distribution channels, or enabling new features that can make it appealing to wholly new customer segments.

As you consider breathing life into your dream scenario, make sure your definition of success answers the following: 

  • How would an exit best manifest the values of your startup? 
  • How could an exit best promote the mission of your startup? 
  • What would be the ideal time frame for an exit transaction? 

Core Hypotheses 

The next task is to make explicit what you would have to believe to be true for that outcome to manifest. Explicitly stating your assumptions helps you and other team members to discuss and gain clarity about what are the necessary conditions for success, and use them to gauge your future progress. 

For example, if a successful exit for you would entail providing growth opportunities for your employees, then at the time of the acquisition you have to believe that your employees have sufficient skills and expertise of value to an acquirer. Thus, stating the hypothesis allows you and your team to reflect on whether this holds true for the current state of affairs, and if not, what you can do to make that a reality going forward. 

To adopt a more quantitative approach, especially if your definition of success has a valuation threshold, you need to investigate and make explicit what it would take to justify your valuation goal based on either other comparable transactions or public market valuation benchmarks. Your desired valuation will likely necessitate achieving a certain set of financial (e.g., revenues, margin, profitability profile, or unit economics) or user (e.g., customer size, growth rate) metrics. A specific valuation goal makes it much more efficient for you to screen and filter acquisition opportunities as they arise. 

More Built in Book Excerpts Why Salesforce’s Biggest Customer Hated Our Product

Strategic Opportunities 

In its simplest form, strategic opportunities are the key areas for value creation with your acquirer. They are the areas of complementarity between your strengths and those of the acquirer. 

As such, to identify areas of strategic opportunity you have to start with a good sense of the strengths and weaknesses of your startup. Then, you need to consider the strengths and weaknesses of potential acquirers and how your strengths can fill in the missing piece for their weaknesses and vice versa. This is what is referred to as “synergy.” 

Exit strategy plan exit path book cover

If you have a prohibitively high cost of customer acquisition that prevents you from profitably growing and acquiring new customers at scale, you would have a strategic opportunity to partner with a company that has already figured out a way to acquire those customers at scale profitably but is looking for additional products to sell to those customers. 

Think of companies in your ecosystem for whom you could fill a strategic need, such as adding revenue, adding profits, staving off a competitive threat, accelerating time to market for a product or service, or improving their market share. 

As you enter into discussions with potential strategic partners, you will want to validate and revise your assumptions around areas of synergy and strategic opportunities and be on the lookout to uncover new areas to add to your list. 

Enjoying the Excerpt? Check Out the Book! Exit Path: How to Win the Startup End Game

Key Acquirers 

This is your wish list of potential acquirers. It will also serve as the list of potential strategic partners whom you will be building a business relationship with over the course of the coming months and years. Be as aspirational as possible. You are not looking for who could be an acquirer of your startup today; instead, you are looking for whom you would be thrilled to join forces with long-term. 

For most cases, you could simply state the category or type of company. For a startup serving small businesses, you could refer to “domain registrars,” “website creation platforms,” “e-commerce tool providers” as potential acquirers. 

Keep in mind that at this stage your goal is to provide directional guidance as to what are critically important criteria for assessing strategic partners and what the universe of those potential partners looks like. 

Risks and Challenges 

When considering your exit path, there are in general three types of risks that most businesses have to contend with: execution risk, market risk, and competitive risk.  

Execution Risk

Execution risk is a reflection of your core competencies, external relationships, reputation, and capitalization structure, all of which can make or break a successful exit. Weakness in your core competencies (such as an inability to manage the mergers and acquisitions process effectively, leadership gaps or a lack of a scalable business model) can stop many acquirers in their tracks. That is why building a strong business is table stakes for a successful exit.

Another often-overlooked risk factor in selling one’s startup is its capitalization structure: you increase your exit risk as you raise more money at higher valuations as well as when you grant voting rights to financial and strategic investors , as it reduces the founding team’s control and increases the possibility for others to block a transaction. It’s important that you understand the implication of those increasingly lofty valuations which at some point may render you “too expensive” for many acquirers. 

More on Startups 4 Strategies for Growing a Company Without VC Funding

Market Risk 

As those of us who have tried to sell a company during a market crash know, market risk is always around the corner, and changes in macroeconomic conditions can very much impact the appetite of potential acquirers without forewarning. Because market risk is always present, the more desperate you are to sell, the higher the impact of market risk will be on your startup, so it is ideal not to time a potential exit around a time when you think you will be running out of cash. 

Competitive Risk 

No matter how unique your startup’s offering is, there is always competition in the market. And thus there exists the competitive risk that your ideal potential acquirers snatch up your competitor instead. Be sure to identify and list your largest competitive threats as an important strategic reminder for your organization. 

Key Mitigants 

For each risk and challenge you identify, call out a clear and specific set of mitigants. 

Mitigating execution risks and competitive risks will generally involve building the requisite capabilities and creating strong relationships with your potential acquirers. The best way to mitigate against market risks, in my opinion, is to increase your operating runway so that you can live through short-term market fluctuations. 

Remember that the ESC is a tool intended to efficiently capture and communicate your exit plan. As you create your ESC, feel free to customize it to your own needs, modifying what is captured in each block or adding new blocks that you may find to be particularly well-suited for your startup’s unique set of values, challenges, and opportunities.

Excerpted from the book  Exit Path: How to Win the Startup End Game by Touraj Parang, pages 44-53. Copyright  © 2022 by Touraj Parang. Published by  McGraw Hill, August 2022.

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How to Plan Your Exit Strategy

Male entrepreneur leaning up against his truck while staring out into the distance smiling. Thinking about how he'll exit his business.

Candice Landau

8 min. read

Updated October 27, 2023

Many people start businesses with the goal of seeking acquisition. But others decide later that it’s time to move on—they’d like to pull their time and money out of a particular venture. It’s never too early (or too late) to start planning your exit strategy.

  • What is the purpose of an exit strategy?

An exit strategy is how entrepreneurs (founders) and investors that have invested large sums of money in  startup companies  transfer ownership of their business to a third party. It’s how investors get a return on the money they invested in the business.

Common exit strategies include being acquired by another company, the sale of equity, or a management or employee buyout.

  • Who needs an exit strategy?

For anyone seeking  venture capital funding  or  angel investment , having a clear exit strategy is essential.

Even if you’re a small business, it’s a good idea to plan ahead and think about how you will transfer ownership of the business down the line, whether you choose to sell the business, or try to scale it and seek to be acquired. It’s never too early to plan.

  • Should I include my exit strategy in my business plan?

Including your exit strategy in  your business plan  and in  your pitch  is especially important for startups that are asking for funding from angel investors or venture capitalists for funds to grow and scale.

Most of the time, small businesses don’t need to worry as much about it because they probably won’t seek investment (not all good businesses are good investments for angels and VCs). The small business founder’s goal might be to own the business themselves for the foreseeable future.

  • What type of exit strategy is right for my business?

This list should give you an idea of common types of exit strategies. The type of strategy you adopt will depend on what type of company you are and your financial and strategic goals.

Here are some of the most common:

Acquisition, initial public offering (ipo), management buyout, family succession, liquidation, what’s your biggest business challenge right now.

The acquisition is often known as a “merger and acquisition.” This is because, when a company decides to sell itself to another company, the buyer will often incorporate or merge the services of that company into their own product or service offerings.

This happened when Google bought YouTube, seamlessly integrating the video platform into their own search product. Now, when you google a topic, you will often notice that videos appear on your search result page.

On a smaller scale, it might happen when a coffee chain decides to buy a bakery business so that they can add a line of pastries and tarts to their menu. An acquisition or merger can be an appropriate approach for businesses of all sizes, including startups.

The best thing about an acquisition is that if you get “strategic alignment” right, you stand to sell the company for more than it may actually be worth. And, if there are multiple companies interested in your product, you may be able to raise the price further or begin a bidding war!

Reasons an outside company might seek to acquire or merge with another company range from allowing them to break into a new market, to giving them a competitive edge, or a strong built-in customer base. Or they might be interested in eliminating you as a competitor from the current market.

If you know that being acquired is your exit strategy right from the start, this gives you room to make yourself appear attractive to the companies who may be interested in purchasing you. That said, remember that those particular companies may decide not to purchase you or may never have been interested in doing so. If you do go down the road of creating a very niche product only one specific company will be interested in, you also stand to lose big time if they don’t take the bait.

This exit strategy is right for a small number of startups and larger corporations, but is not suited to most small businesses, primarily because it means convincing both investors and Wall Street analysts that stock in your business will be worth something to the general public.

For smaller companies that have already begun expanding—like  restaurants that have franchised —an IPO may be a good way for the owner to recoup money spent, though it is worth noting that he or she may not be allowed to sell stock until the  lock-up period  has passed.

A couple of well-known examples of restaurants on the stock exchange include  Buffalo Wild Wings  and  BJ’s .

If you think this is the right strategy for you, or you want to at least have the option of going public later, the easiest way to get listed is to seek investors that have done it before with other companies. They will know the ins and outs and be able to better prepare you for the process.

Speaking of the process—it’s long and hard. If you do succeed in winning over the hearts and data-centric minds of Wall Street analysts, you’ve still got to conform to the standards set by the  Sarbanes-Oxley Act , you will have underwriting fees you’ll need to pay, a potential “lock-up period” preventing you from selling your shares, and of course, the risk of seeing the stock market crash.

While an IPO may be a suitable route for a company like Twitter or Macy’s, consider whether or not you want to weather the headache of tailoring business decisions to the market and to what analysts believe will do well.

If you’ve built a business whose legacy you want to see continued long after you’re gone, you may want to consider turning to your employees.

That’s right—not only will they have a good idea of how things are run already, but they will have intimate knowledge regarding company culture, corporate goals, and a pre-existing determination to make it work.

There’s also the added bonus that you’ll have to do a lot less due diligence. Having management or employees buy your business is a good idea if legacy matters most to you. Of course, you could always consider passing the business on to family, but there’s always the risk there that they won’t understand the business, won’t have the determination to make it succeed, and if you’re splitting the business between family members, the possibility of family rivalry.

On that note, if your family has been brought up with an intimate knowledge and understanding of your business, they may well be the best people to pass things on to.

In fact, this is exactly what happened at Palo Alto Software. Founded by Tim Berry in 1988, his daughter Sabrina Parsons was made CEO and her husband Noah the COO shortly before the recession hit.

The decision was strategic and allowed Tim to pursue other interests, including putting a focus on  writing . Since then, Sabrina and Noah have adapted the flagship desktop-based business planning product,  Business Plan Pro , into a SaaS tool called  LivePlan .

Passing Palo Alto Software on to family was more fortuitous than carefully planned. Tim had always  encouraged his children  to follow their own path. In fact, none of them got degrees in business. It just so happened that Sabrina and Noah had entered the internet world early in their careers and gained the experience necessary to join and build out Palo Alto Software’s product offerings.

If you are considering passing your business on to your children or other family members, there are a number of things worth thinking about and planning for, including ensuring that whoever is set to take over the business has the relevant skill set, is competent, and is committed to the future and success of the business. This will make it a lot easier to retire.

For small businesses, liquidation is a common exit strategy. It’s one of the fastest ways to close a business, and may sometimes be the only option in cases where the operation of the business is dependent solely upon one individual, where family members are not interested in or capable of taking over, and where  bankruptcy  is close at hand.

It’s worth noting though that any profits made from selling assets need to be used to pay creditors first.

To make any money using liquidation as an exit strategy, you’re going to have to have valuable assets you can sell—like land, equipment, and so on.

If it’s not too much hassle and if your decision to liquidate is not related to finances, think instead about selling the business to the public. Are there any ways you can make it appealing?

If this isn’t an option and it’s better to close the doors before you lose money, liquidating your assets may be your best bet.

  • Planning for the future?

If you’re putting together your business plan or preparing to pitch to investors for the first time, think through your exit strategy. Make sure your  financials are up to date  and that you’re reviewing them regularly so your  business’s valuation  is accurate.

If your successful exit is tied up in hitting certain financial milestones, don’t hesitate to ask your  strategic business advisor  for some guidance. There are other things you can do to prepare your business for acquisition and other exits— check out this article  for more information.

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Content Author: Candice Landau

Candice is a freelance writer, jeweler, and digital marketing hybrid.

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What Is an Exit Strategy?

Understanding exit strategies, who needs an exit plan, why is it important to have an exit plan, exit strategies for startups, exit strategies for established businesses, exit strategies for investors, why is it important to have an exit plan, what are common exit strategies used by startups, what are common exit strategies used by established companies, what exit strategies can investors use, the bottom line.

  • Investing Basics

Exit Strategy Definition for an Investment or Business

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

exit plan stage business

Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

exit plan stage business

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.

Key Takeaways

  • An exit strategy is a conscious plan to dispose of an investment in a business venture or financial asset.
  • An exit strategy helps to minimize losses and maximize profits on investments.
  • Startup exit strategies include initial public offerings (IPOs), acquisitions, or buyouts but may also include liquidation or bankruptcy to exit a failing company.
  • Established business exit plans include mergers and acquisitions as well as liquidation and bankruptcy for insolvent companies.
  • Exit strategies for investors include the 1% rule, a percentage-based exit, a time-based exit, or selling a stake in a business.

An 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.

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.

Businesses and investors should have a clearly defined exit plan to minimize potential losses and maximize profits on their investments. Here are several specific reasons why it’s important to have an exit plan.

Removes emotions : An exit plan removes emotions from the decision-making process. Having a predetermined level at which to exit an investment or sell a business helps avoid panic selling or making rushed decisions when emotions are high, which could accentuate a loss or not fully realize a profit.

Goal setting : Having an exit plan with specific goals helps answer important questions and guides future strategic decision making. For example, a startup’s exit plan might include a future buyout price that it would accept based on revenue turnover. That figure would help make strategic decisions about how big to grow the company to reach predetermined sales targets.

Unexpected events : Unexpected events are a part of life. Therefore, it’s essential to have an exit strategy for what happens when things don’t go to plan. For instance, what happens to a business if the owner faces an unexpected illness? What happens if the company loses a key supplier or customer? These situations need planning in advance to minimize potential losses and capitalize on gains.

Succession planning : An exit plan specifies what happens to the business when key personnel leave. For example, an exit strategy might stipulate through a succession plan that the company passes to another family member or that the business sells a stake to other owners or founders. Carefully detailed succession planning of an exit strategy can help avoid potential conflict when a business owner wants to or has to depart.

In the case of a startup business, successful entrepreneurs plan for a comprehensive exit strategy to prepare for business operations not meeting predetermined milestones.

If cash flow draws down to a point where business operations are no longer sustainable, and an external capital infusion is no longer feasible to maintain operations, then a planned termination of operations and a liquidation of all assets are sometimes the best options to limit further losses.

Most venture capitalists insist that a carefully planned exit strategy be included in a business plan before committing any capital. Business owners or investors may also choose to exit if a lucrative offer for the business is tendered by another party.

Ideally, an entrepreneur will develop an exit strategy in their initial business plan before launching the business. The choice of exit plan will influence business development decisions. Common types of exit strategies include IPOs, strategic acquisitions , and management buyouts (MBOs).

The exit strategy that an entrepreneur chooses depends on many factors, such as how much control or involvement they want to retain in the business, whether they want the company to continue being operated in the same way, or if they are willing to see it change going forward. The entrepreneur will want to be paid a fair price for their ownership share.

A strategic acquisition, for example, will relieve the founder of their ownership responsibilities but will also mean giving up control. IPOs are often considered the ultimate exit strategy since they are associated with prestige and high payoffs. Contrastingly, bankruptcy is seen as the least desirable way to exit a startup.

A key aspect of an exit strategy is business valuation , and there are specialists who can help business owners (and buyers) examine a company’s financial statements to determine a fair value. There are also transition managers whose role is to assist sellers with their business exit strategies.

In the case of an established business, successful CEOs develop a comprehensive exit strategy as part of their contingency planning for the company.

Larger businesses often favor a merger or acquisition as an exit strategy, as it can be a lucrative way to remunerate owners and/or shareholders. Rival companies often pay a premium to buy out a company that allows them to increase market share , acquire intellectual property, or eliminate competition. This raises the prospects of other rivals also placing a bid for the company, ultimately rewarding the sellers of the business.

However, a merger-and-acquisition-focused exit strategy should factor in the time and costs to organize large deals as well as regulatory considerations, such as antitrust laws .

Established companies also plan for how to exit a failing business, which usually involves liquidation or bankruptcy. Liquidation consists of closing down the business and selling off all its assets , with any leftover cash going toward paying off debts and distributing among shareholders . 

As mentioned above, most businesses see bankruptcy as a last-resort exit; however, it sometimes becomes the only viable option. Under this scenario, a company’s assets are seized, and it receives relief from its debts. However, declaring bankruptcy could prevent business owners from borrowing credit or starting another company in the future.

Investors can use several different exit strategies to prudently manage their investments. Below, we look at several strategies that help minimize losses and maximize gains.

Selling equity stake : Investors with shares in a startup or small company could exit by selling their equity stake in the business to other investors or a family member. Selling an equity stake may form part of a succession plan agreed upon by founders when starting a business. If selling a startup stake to a family member, it’s important that they understand any conditions tied to the investment.

The 1% rule : Investors apply this rule by exiting an investment if the maximum loss equals 1% of their liquid net worth . For example, if Olivia has a liquid net worth of $2 million, she would cut an investment if it generates a loss of $20,000 ((1 ÷ 100) × 2,000,000). The 1% rule helps investors take a systematic approach to protect their capital.

Percentage exit : Using this strategy, investors exit an investment when it has gained or fallen by a certain percentage from its purchase price. For instance, Ethan, an angel investor, may decide to sell his share in a startup if it achieves a 300% return on investment (ROI) . Conversely, Amelia, a venture capitalist, may decide to sell her share in a startup if it drops 20% in value.

Time-based exit : Investors apply this strategy by exiting their investment after a specific amount of time has passed. For example, Noah may decide to sell his stake in a business after 18 months if it has not generated a positive return. A time-based exit helps free up capital from underperforming investments that could be used for other opportunities. 

Businesses should have a clearly defined exit plan to help manage risk and capitalize on opportunities. Specifically, an exit plan helps remove emotion from decision making, assists with strategic direction, helps to plan for unexpected events, and provides details about an actionable succession plan. 

Exit strategies used by early-stage companies include initial public offerings (IPOs), strategic acquisitions, and management buyouts (MBOs). Entrepreneurs typically select an exit plan before launching a business that fits their longer-term business development decisions and goals. The exit strategy that an entrepreneur chooses depends on factors such as how much involvement they want to retain in the business and its future long-term potential.

More established companies favor mergers and acquisitions as an exit strategy because it often leads to a favorable deal for shareholders, particularly if a rival company wants to increase its market share or acquire intellectual property. Larger companies may exit a loss-making business by liquidating their assets or declaring bankruptcy.

Investors can capitalize on gains and reduce risk by using exit strategies such as the 1% rule, a percentage-based exit, a time-based exit, or selling their equity stake in a business to other investors or family members. Investors typically set an exit strategy before entering into an investment, as it helps to manage emotions and determine if there is a favorable risk-return tradeoff .

Exit strategy refers to how a business owner or investor will liquidate an asset once predetermined conditions have been met. An exit plan helps to minimize potential losses and maximize profits by keeping emotions in check and setting quantifiable goals.

Common exit strategies for startups include IPOs, strategic acquisitions, and MBOs. More established companies often favor a merger or acquisition as an exit strategy but may also choose to go into liquidation or file for bankruptcy if becoming insolvent . Meanwhile, investors can exit investments using strategies such as the 1% rule, a percentage-based exit, a time-based exit, or selling their equity stake in a business.

Selling My Business. “ The Importance of Having an Exit Plan .”

AllBusiness.com, via Internet Archive. “ 10 Reasons Why Your Exit Strategy Is as Important as Your Business Plan .”

Ansarada. “ Different Business Exit Strategies, Their Pros and Cons .”

Experian. “ What Is an Exit Strategy for Investing? ”

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Business Exit Strategy Planning

Written by Dave Lavinsky

Growthink.com Exit Strategy Planning

This guide to planning your exit strategy is the result of Growthink’s 20+ years of experience helping companies develop successful exit plans.

The guide starts by explaining what a business exit strategy is. It then explains the types of exit strategies available to your business.

It then discusses the key takeaways to successful exit strategy planning. In this section, we spend a significant amount of time going through the 20 ways to maximize the value of your company to realize a successful exit.

Finally, this guide provides helpful tips regarding how to create an exit strategy business plan for your organization.

What is a Business Exit Strategy?

A business exit strategy is a plan that an owner or executive creates and follows to liquidate their stake in a business, ideally at a substantial profit.

A successful business exit strategy requires careful planning and should be periodically revised to best reflect the current business conditions.

Types of Common Exit Strategies

To ultimately build an effective exit plan it’s important to understand the ways you can exit a business and which type of exit aligns with your business goals and values.

For example, if your end goal is generating money and personal wealth, then selling your business to a competitor or a private equity group might be a viable exit plan. However, if you are more attached to your business’ legacy and wish to see it operational even after your exit, then selling to current skilled employees or family member succession planning might be business exit strategies worth exploring.

Below are the six core types of exit strategies, organized into two core categories: Selling Your Business and Other Business Exit Strategies.

Selling Your Business

There are three main audiences to consider when selling your business: another business, a financial group, and employees. When evaluating the sale, gauge the attractiveness of your business from the perspective of potential buyers or other investors.

A solid reputation, customer base, and track record of growth are some factors that make a business appealing to buyers. Other factors could include strong cash flow, patented intellectual property, or niche expertise. Note that these factors are discussed in the “Keys to Successful Exit Strategy Planning” section later in this guide.

Another Business (or a Strategic Buyer) : Businesses acquire other businesses for a variety of reasons. From a buyer’s perspective, a strategic acquisition is often the quickest way to grow and/or diversify a business. It is also a surefire way to eliminate competition. For these reasons, valuations in strategic acquisitions are often highest. The drawback to this path is that most companies do not have an active mandate to acquire another business. A business owner may first need to be convinced of the idea of an acquisition exit strategy generally before entertaining the specific opportunity to purchase your business. He or she may then need to obtain financing to complete a transaction. Both of these elements can slow your exit process.

Therefore, when exploring this path it is important to plan ahead and identify firms that could be potential acquirers by keeping up with transaction activity in the same industry. Keep a lookout for firms that are actively buying other businesses and position your business in a way that appeals most to them. This will maximize your chances of receiving an enviable acquisition offer from a larger business that is prepared to buy.

Financial Buyer : A financial buyer refers to an individual or group, like a private equity firm, who is primarily interested in the cash flows your business can generate post-acquisition. Financial buyers’ sole activity is the buying and selling of businesses, so these buyers are prepared to efficiently and effectively evaluate a business and have capital in place to quickly execute a transaction. Given their valuation approach and goal of future cash flows, financial buyers are typically looking for relatively high historical operating profits ($3 million at a minimum). Typically private equity groups value a company based largely, if not exclusively, on a multiple of past operating profits. These multiples may or may not take into consideration the growth opportunities you see for your business and so you may not see the same valuation as a strategic buyer.

Your Employees : Selling the business to employees is another business exit strategy to consider. The advantage of this employee or management buyout strategy is that you are transitioning to people who are well-versed in the business and have a vested interest to see it thrive. If you are structured as a corporation, you can create an Employee Stock Option Plan (ESOP), which allows employees to vest ownership in your business. When you are ready to exit, the larger business then purchases your shares from you and redistributes them to the remaining employees. A similar option is establishing a worker-owned cooperative. In this scenario, employees invest personal capital into shares of the cooperative. For this to work, it is essential that you foster a participatory culture in your organization and be mentally prepared to stay on until the transition is complete.

Other Business Exit Strategies

If you do not plan to sell your business, the following are other exit strategies to consider.

Family Succession : This business exit strategy involves transferring the mantle of leadership to the next generation in your family. This common exit strategy is popular with owners who wish to see their legacy continue. The advantages of family succession include the ability to choose a successor of your choice and groom them. It also allows for the sole business owner to remain involved. The success of this exit strategy often hinges on the personal attributes and professional skills of the new successor. Their commitment to the family business and the quality of their relationships with other employees are also critical factors.

Asset Sale : This business exit strategy involves shutting down the entire business and selling some or all its assets. For this exit strategy to be profitable the business needs to have certain value-adding assets it can sell, such as land, building(s), or equipment.

Compared to a stock sale, asset sales typically involve limited negotiations. You also do not have to worry about the transfer and transition of the business ownership. The negative obviously is the loss of the business you built.

Taking Your Business Public : Another company exit strategy you may consider is an Initial Public Offering (IPO). We mention this last since it’s only relevant to a tiny portion of companies. An IPO involves selling your business in public markets like the New York Stock Exchange (NYSE). IPOs receive wide media coverage but are not very common. This is because they are very expensive and laborious to undertake. Every IPO requires thorough financial, operational, and staffing reports among others which can be very costly to produce. Incurring such costs is not feasible for small to medium-sized businesses; hence this exit strategy is not practical for many organizations. If you do manage an IPO then the pros are instant popularity as IPOs are usually quite a hyped event. You might even get lucky and have your business valued highly on the stock market leading to your stock value appreciating exponentially.

What’s the Best Exit Strategy?

There is no single best or preferred exit strategy. The ideal choice for your business depends on your unique circumstances.

Your Business Goals : You need to assess how ready you are to give up control of the business and when you want to exit. This is a personal decision but consider this: if you have been running the business solo or with a very small team, then an initial public offering (IPO) or selling to a larger business may not be the best option.

Your Business Size and Structure : Another key consideration is your company size and structure. If you are a small business, then an asset sale or family member succession might be the more feasible option for you. On the other hand, if you are a corporation with tens or hundreds of employees, then going public is a more viable option.

Your Business Age and Stage : The next thing you need to consider is your company’s age and stage. If your business is young and growing, then you might want to consider an IPO as your exit strategy. However, if your business is in its maturity stage or even in decline, then an asset sale or family succession might be more suitable.

The Bottom Line

No one can tell you what the best exit strategy is for your business. The key is to weigh all the options and make a decision that aligns with your personal and professional goals for a successful future.

Keys to Successful Exit Strategy Planning

The key to successful business exit planning involves just two steps: 1) determining how strategic or financial buyers will value your business, and 2) maximizing that value.

Determining How Your Business Will/Might Be Valued

As discussed above, if you seek a financial buyer, they will value your business based on your company’s financials, cash flow, and future growth prospects.

Strategic buyers, which nearly always pay more money than financial buyers, and thus should generally be your focus, will value your business differently.

The best way to identify how they will value your business is to:

  • Research acquisitions in your market (via trade journals, Google searches, etc.)
  • Determine exactly what metrics will you be primarily valued on? Ideally in your searches, you will see what attributes were mentioned in articles discussing the acquisitions. Did they mention the acquired company’s revenues, # of subscribers/customers, market share, EBITDA? Whatever metrics are mentioned will be key-value drives.
  • Identify factors multiple strategic buyers would value, such as new products, a distribution network, intellectual property (IP), unique location(s), financial savings, better systems/processes, permits, etc. These factors are discussed in more detail in the next section.

Maximize the Value of Your Business

To help in your business exit planning, we have identified 20 ways to build and maximize the value of your business. Each of these concepts is discussed in detail below.

1. Build Synergistic Value

Synergistic value is when you and an acquiring company together have more value than the two separate companies.

So how might you create synergy? Perhaps your products or services could be sold to the acquiring company’s large customer base?

For example, maybe the acquiring business sells parts to bicycle stores and you have a new part that is also sold to bicycle stores. But perhaps they sell to 5,000 bicycle stores and you only sell to 500.

By getting your part into the additional 4,500 stores, they may be able to increase your sales tenfold. That’s huge synergy.

There are many other areas of potential synergy. Perhaps you have a unique core competency that can be leveraged by the acquiring business. Maybe you’re an incredible Internet marketer and the company that wants to acquire you is not great at internet marketing. And by leveraging your unique marketing skills they could dramatically grow their business.

So think through the synergy fit. Think through what companies might want to buy you at some point and what synergistic value you could bring to that organization.

2. Diversify & Lock Down Your Customer Base

The next thing you can do to maximize the value of your business is to diversify and lock down your customer base.

There’s a threat to your company’s value when you have a concentrated customer base, which is few customers or customers representing 5%, 10%, or more of your sales. That is risky because if one of your bigger customers or multiple big customers leave, your sales and profits could drop precipitously.

Another big risk is when customers have personal relations with the owner because you (the owner) would be lost after the acquisition. Or if customers have personal relationships that are too strong with a salesperson and that salesperson leaves your business and the customer leaves us with them.

So what are the solutions to these threats?

First, diversify your customer base. You need to be thinking about diversifying your customer base so that you don’t have the risk of a big customer or more leaving.

Secondly, if possible, secure contractual sale agreements such as long-term contracts and licenses to ensure ongoing sales from customers. The idea here (and lowest risk to buyers) is contractually recurring revenues.

3. Diversify Vendors

The third thing you want to do to maximize the value of your business is to diversify your vendors. Consider what would happen if a key vendor raises its prices or goes out of business. Would your business be in trouble?

Acquirers are going to ask what happens if something happens to one of your vendors. Likewise, you need to be asking this question of your business right now.

So what are the solutions?

Finding and using multiple vendors. Importantly, you’re probably not going to generate more revenue tomorrow because you spend hours looking for multiple vendors. But it’s going to make your business stronger. It’s going to remove risk from your business and make it more valuable to acquirers.

4. Put “Successor” Clauses in Customer (and Partner, Vendor/Supplier, etc.) Contracts

The next way to maximize your value is to put successor clauses in your customer, partner, and vendor contracts.

Successor clauses ensure that your key contracts survive significant changes in ownership so the buyer receives full value from them. Many contracts become void if your business transfers ownership and you obviously don’t want that. So when you sign contracts with customers, vendors, partners, etc., make sure you have clauses that the contract survives the acquisition of your company. If not, this could significantly reduce the value of your business.

5. Bolster Your Senior Management Team

The next way to maximize the value of your business is to bolster your senior management. You need to make sure your business can run without you because then there’s less risk to the buyer.

Doing this also means that you might need to stay with the business for less time after you sell it. To bolster your senior team, and make sure that you’ve hired and trained quality people that can run the business for you.

6. Bolster Your Middle Management Team

The next thing to boost value is to bolster your middle management team. Once again, you need more trained people so the business can run without you. This lessens the risk to a buyer.

Having trained middle management will help ensure a smooth transition to the new owner. There’s always going to be a transition period where you’re integrating your business with the acquirers. The more trained staff you have makes it much easier for the acquirer to buy your business and have the business run as usual from the get-go.

7. Build Management Team Solidarity

The next value-building strategy is to build management team solidarity on a day-to-day basis. To succeed with the day-to-day business operations, your team must have the same business vision and financial goals as you.

During the sales process to an acquirer, the same holds true. This is because buyers will interview your team members individually during the due diligence phase to make sure there is a cohesive vision/direction among your key employees.

8. Improve the Quality of Your Team

Will acquiring your team add significant value to the buyer? How unique is your team? And do you have unique talents?

As you can imagine from these questions, your team can add a lot of value to your company.

To begin, if your team has unique technical capabilities, great customer service people, etc., it could have great value to an acquirer. Likewise, it’s extremely valuable if your team have a track record or ability to do things really well on an ongoing basis, such as:

  • Conduct R&D to come up with new products
  • Bring new products to market
  • Provide exceptional customer service

So, think about what your team is great at, and work to make them even better.

9. Build Brand Value

The next way to maximize the value of your company is to build your brand. The value of your brand and your reputation can be considerable. A well-known brand results in recognition which often equals sales for the foreseeable future.

So building your brand gives you a lot of recognition, which has a lot of value. Building your brand also gives you trust. This is why a lot of brands are acquired.

So think about the value of your brand. How can you build your brand to make it more well-known?

10. Build Intellectual Property

Intellectual Property (IP) can provide significant value. IP includes your patents, processes, copyrights, trademarks and service marks, and trade secrets.

Sometimes your IP value can represent the entire purchase price of your business.

Think about intellectual property and how you use that IP to create real value for your company. And ideally how it can provide even more value to an acquirer.

11. Improve Your Culture

The next way to build value is through your culture.

Zappos is a great example of a company that built a great culture. And as a result, Amazon acquired it for over a billion dollars.

So you think about how you can build a great company culture that allows you to build a solid company and be acquired for a lot of money. Importantly, Zappos’ culture became a threat to Amazon and Amazon purchased the company because of this threat.

So consider this question: can your culture positively “infect” the culture of an acquirer?

It’s one thing to build a great culture but think about if you can create a great culture that when acquired, is so great and strong that you can “infect” the larger company that buys you with it. That’s a great way to build value.

12. Build Back-Office Infrastructure

You can also build value through your back-office infrastructure.

Your back-office infrastructure includes all the departments that support your revenue-generating areas, such as IT, human resources, accounting, legal, etc. A solid back-office ensures your business continues to run smoothly without you and after an acquisition.

This is really important to financial buyers because financial buyers want to see your business grow as a standalone business. They’re looking to acquire your business, grow it for four to eight years, and then sell it.

A strong back-office infrastructure can also be important for strategic buyers. They will care if you have a strategic or competitive advantage in any of these back-office areas. If not, they’re going to dissolve or integrate your back office into their own departments.

13. Build Revenues, Subscribers/Customers &/or EBITDA

Building revenue streams, subscribers, customers, and/or EBITDA is an obvious way to really build value in your company.

Subscribers and customers are assets that are highly valued and bring future sales and maximize profits.

And revenue and EBITDA are key financial measures that show your success and can be used to estimate the price at which acquirers might purchase your company.

14. Acquire Great Locations

Another way to maximize your value. Is by making sure your location(s) is/are very strong.

By locking up the right locations, you can add a lot of value to your organization.

For example, Rosetta Stone has kiosk lease agreements at airports throughout the world. That’s really valuable…if an acquirer wanted to buy Rosetta Stone, they would instantly gain visibility in airports throughout the world.

Likewise, when FedEx purchased Kinko’s, it instantly gained hundreds of well-placed retail locations.

15. Build Your Distribution Network

Another way to maximize value is through your distribution network.

Distributors, resellers, and/or affiliates are individuals and organizations that sell their products and services for you. That’s a huge asset that can maximize your revenues and profits, and which could do the same for your acquirer.

So, the question to ask yourself is: what can you do to gain a large distribution network that will increase your revenues and make you a more attractive acquisition target?

16. Improve Your Product/Service Portfolio

The next way to really build value in your business is to focus on your product and service portfolio.

Think about the products and services you currently offer. Are they unique? Can they be leveraged by an acquirer? Do they represent a threat to an acquirer’s business?

Think about what new products and or services you can build to develop value. More products generally equal more revenues, more customers, more intellectual property, and less vulnerability.

The more products you have, the more you could cross-sell your current customers, upsell them, and the less vulnerable you’d be to a competitor who launches a similar product to yours.

17. Show Financial Savings

The next way to maximize value is through financial savings. Do you have economies of scale in certain areas? Do you do things so often that you’re able to get your costs down on a per-unit basis? If so, such cost savings could be valuable to an acquirer.

18. Create Systems & Processes

Likewise, do you have any processes, systems and ways and ways of doing business that save money? These will all be valuable to your current business and to acquirers.

Likewise, systems and processes can add tremendous value to your business right away. And quality systems and processes are valuable assets. They allow you to perform with precision and consistency. They allow you to perform at lower costs and gain efficiencies and allows you to quickly and easily train and integrate new team members.

So focus on building quality systems and processes.

19. Create a Great Website

Your website can also be a source of value maximization too.

Not only might your website, based on your brand, attract visitors. But, if you’ve invested in SEO or search engine optimization, you might organically rank for many keywords. If your site is SEO optimized, an acquirer might be able to use it to rank for additional keywords that have significant value to them.

So it’s worth building a great website and optimizing it for search engines.

20. Achieving Government Hurdles

Achieving/overcoming government hurdles can add significant value to your business. Getting permits, zoning approval licenses, regulatory approvals, and certifications can be extremely valuable in the short-term to your business, but also really valuable to an acquirer.

Doubling the Value of Your Company

Doing everything listed above can exponentially increase the value of your business. In addition, you can literally double the value/purchase price of your company by expertly executing the sales transaction:

  • Presentation : how you position your company and support your valuation
  • Professional sales process : getting more buyers, revealing information at the right times, etc.
  • Negotiating and closing skills : getting the right deal done

Creating Your Exit Strategy Business Plan

The process of creating your exit strategy business plan includes the following:

1. Create a List of Potential Acquirers

If you are interested in being acquired at some point in the future, identify companies you think would be ideal.

2. Determine How You Will/Might Be Valued

Go through the 20 value maximization concepts presented above and identify which of them would be most valuable to each potential acquirer.

3. Create Your Strategic Plan

In your strategic plan, identify each of the ways you will build value (e.g., develop new systems).

Document the timeline for creating each new asset along with the financial requirements and the staff members who will lead each initiative.

How Growthink Can Help

These concepts should help you think about how your brand can be more valuable to potential acquirers. The goal is not only to attract them but also to convert casual visitors into sales. Achieving these goals will make it easier for you to get out of the rat race and finally achieve success as an entrepreneur or business owner. If this all sounds complicated and overwhelming, we’re here to help!

You can get started today on your exit strategy using our Ultimate Business Plan Template to help you create a business plan if you are seeking funding. If you don’t need outside funding to execute your exit plan, use our Ultimate Strategic Plan Template .

Our team of experts is also ready to help! At Growthink, we specialize in helping entrepreneurs grow their businesses through expert advice on business models, business plans & strategy, financial planning, and exit strategy and valuation services. Contact us today to learn more.  

Other Helpful Business Plan Articles & Templates

Download a Free Business Plan Template

It’s Not the End: Why Creating an Exit Strategy Sets Your Business Up for Long-Term Success

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While there is a lot of content around how to successfully get your business off the ground, there isn’t much talk about creating an exit strategy to successfully quit a business. After all, who would want to think about leaving when you have likely spent years, if not decades, establishing your empire? Many businesses think of an exit strategy as a sort of “doom and gloom” outlook. In reality, it’s a good safety net to have, especially when you understand what it is and what it means for your business.

What is an exit strategy in business?

An exit strategy is a proactive plan to shift out of or liquidate an investment position, business transaction or venture. “An exit plan provides a roadmap for how businesses or investors will exit after realizing gains from their investment,” notes Carey Smith, senior vice president and chief operating officer of Blue Cross and Blue Shield of Minnesota. “Having a plan to exit helps manage risk by reducing exposure to potential downsides if conditions change and is especially important for startups or high-risk investments that face higher levels of uncertainty.”

Just as important as the strategy that initiated the business is the one that guides the “how” and “when” to exit. In an ideal situation, this plan is detailed along with triggers, measures and even events that could signal the right time to exit and move to the next thing.

“Being deliberate in defining the exit triggers is important because they may not be recognizable when they arise, if there hasn’t been proactive thought as to what they may be,” Smith adds. Also, business models, strategies and market conditions frequently change and evolve as the business progresses, so it is important to revisit them periodically. While not all exit triggers might need drastic action, defining them helps the business understand when to persevere and when to move on. 

“Remaining flexible is important. In our case at Plurilock, we went public very early during the pandemic, as that was an option available to us then,” says Ian Paterson, CEO and founder of Plurilock, a leading AI cybersecurity company. “However, if we wanted to do the same thing right now, it would have been very difficult to accomplish that.” 

Plan your business with the end in mind

As creators and entrepreneurs, starting with the end in mind is not an easy mindset to have and certainly requires a shift in perspective. Be aware of business environments and world factors that could influence or impact your decision, and make that a point of focus while building the strategy.

When thinking about the “how to” of exit strategies, Paterson recommends thinking of it like a car trip.

  • Start with the end in mind . Know who you’re going to sell to and what they value. 
  • Plan a route . Know what milestones you need to hit at various stages along the journey. 
  • Ask for directions . Engage with service providers like bankers and accountants frequently.
  • Don’t run out of gas . Make sure when you go to sell the company you don’t run out of money and negotiating power.
  • Pace yourself . It’s a long ride.

And contrary to popular belief, an exit strategy does in fact align interests, incentives and goals regarding growth and profitability because it defines targets aimed toward business growth. “A well-defined exit strategy allows both businesses and investors to set expectations, manage risks, provide motivation and unlock the value created in an investment,” Smith notes.

Are there different types of exit strategies?

Key types of exit strategies available to businesses include sale of ownership, initial public offering (IPO), liquidation, recapitalization, debt restructuring or refinancing, ownership transfer, merger or buyback.

To determine which strategy might work best for you, a good place to start is to look at industry models applicable to similar businesses. Paterson advises that if the exit strategy is acquired by a competitor, certain aspects of the company, like corporate finances and internal controls, are more important than if the goal was to take the company public. 

If the goal is to get acquired by a venture capital, intellectual property, personnel and other assets might be more valuable. “With my company Plurilock, where we are acquiring regional cybersecurity providers, we are looking for strong sales and marketing teams with strong contracts,” he adds. “We value the strength of those relationships, and it is a strong component of our value process.” 

Exit strategy models to emulate

When looking at industry models to emulate, both Smith and Paterson share examples of both successes and failures. Smith notes that Facebook’s acquisition of Instagram ($1 billion), Oculus ($2 billion) and WhatsApp ($19 billion) provided significant returns for its investors. 

Likewise, Walt Disney Company’s acquisitions of Pixar and Marvel provided significant revenue and strategic market positioning. Perhaps one of the most notable is Google’s acquisition of Android, “which has successfully positioned Google as the market leader in smartphone operating systems, allowing significant control and access to consumer data,” Smith shares.

“Twitter is an interesting case study because it played out on the public stage,” Paterson notes. “Like many exits, at some points during the process, it looked like the deal would not go through, but eventually it closed roughly as expected.” 

For all the successful exits, there are an equal or greater number of failed exits that didn’t get the expected results. “Yahoo is one of the best examples of failing to acquire other exiting companies and failing to maximize on their own exit,” Smith recalls. “Yahoo refused to buy Google for $1 billion in 1998 and again refused $5 billion in 2002. In 2023, Google has a market cap of $1.7 trillion. And sadly, in 2008 Yahoo turned down an offer to be acquired by Microsoft for $44.6 billion and instead sold themselves to Verizon in 2016 for only $4.6 billion.”

How to create an exit strategy

When building a successful exit strategy, Smith suggests a checklist to help you get started:

  • Document all the potential situations that would call for an exit, like market considerations, industry challenges and business model economics. 
  • Allow for flexibility to support changes in priorities and space for new ideas, alternatives and changes in market conditions. 
  • Define success metrics and articulate the outcome objectives and the value they will generate. 
  • Note investor expectations to ensure alignment with the achievable value expected. 
  • Create a roadmap with an exit timeline and expected targeted returns.

The choice of business model and industry influences the selection of an appropriate exit strategy. Startups take time to build an attractive valuation and therefore require patient investors with long-term exit plans such as venture capital firms. High-growth businesses require large capital investments, so they typically prefer acquisition exits in order to scale. 

High capital-intensive businesses have exit plans that require mergers where value is created through combined scale. Business models that generate value from intellectual property (IP) typically have exit plans that involve acquisition or revenue sharing and licensing deals that provide royalty.

Plan B: Less conventional options

If none of these types of exit strategies work, the good news is that there are a few less conventional exit strategies to consider. Employee stock ownership plans (ESOPs) give employees a more vested interest in the company, thereby allowing the original investor or owners to step back. Joint ventures (JVs) are co-owned partnerships where external parties are brought into the company fold. 

“Special Purpose Acquisition Company (SPAC) is a newer exit strategy that is growing in popularity, where a merger takes place with external SPAC providing capital investment opportunities that allow it to go public (IPO) at a much higher valuation,” Smith advises. Lastly, earnouts are contingent payments that can be based on future company performance. 

Creating an exit strategy is a smart business decision from the get-go and shows a forward-thinking approach to any business. For one to be successful, it is important to research and think about all factors that would impact the how , why and what of an exit strategy. 

“The most helpful thing to do would be to talk to a specialist, such as an investment banker and business broker to talk through strategies,” Paterson suggests. Smith adds, “Aligning the exit strategy with the vision and entrepreneurial motivations allows achieving value while also serving goals beyond just an immediate financial return.”

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How to Write a Business Exit Plan

Create a profitable plan from the start

All good business planning documents have a clear business exit plan that outlines your most likely exit strategy from day one.

It may seem odd to develop a business exit plan this soon, to anticipate the day you'll leave your business, but potential investors will want to know your long-term plans. Your exit plans need to be clear in your mind because they will dictate how you operate the company.

For example, if you plan to get listed on the stock market, you’ll want to follow certain accounting regulations from day one that'd otherwise be non-essential and potentially cost prohibitive if your ambitions are to quickly sell the company to a more established competitor in your industry. If you plan to pass the business to your children, you’ll need to start training them at a certain point and get them invested in the company from an early age.

Here’s a look at some of the available strategies for entrepreneurs who want to build a business exit plan into their early planning process:

Long-Term Involvement

  • Let It Run Dry: This can work especially well in small businesses like sole proprietorships . In the years before you plan to exit, increase your personal salary and pay yourself bonuses. Make sure you are on track to settle any remaining debt, and then you can simply close the doors and liquidate any remaining assets. With the larger income, naturally, comes a larger tax liability, but this business exit plan is one of the easiest to execute.
  • Sell Your Shares: This works particularly well in partnerships such as law and medical practices. When you are ready to retire, you can sell your equity to the existing partners, or to a new employee who is eligible for partnership. You leave the firm cleanly, plus you gain the earnings from the sale.
  • Liquidate: Sell everything at market value and use the revenue to pay off any remaining debt. It is a simple approach, but also likely to reap the least revenue as a business exit plan. Since you are simply matching your assets with buyers, you probably will be eager to sell and therefore at a disadvantage when negotiating.

Short-Term Involvement

  • Go Public: The dot-com boom and bust reminded everyone of the potential hazards of the stock market. While you may be sitting on the next Google, IPOs take much time to prepare and can cost anywhere from several hundred thousand to several million dollars, depending on the exchange and the size of the offering. However, the costs can often be covered by intermediate funding rounds. Keep in mind, that the likelihood of your company ever going public is very low, as you'll likely need to reach into the tens of millions of dollars in annual revenue before you're an attractive IPO candidate.
  • Merge: Sometimes, two businesses can create more value as one company. If you believe such an opportunity exists for your firm as a business exit plan, then a merger may be your ticket. If you’re looking to leave entirely, then the merger would likely call for the head of the other involved company to stay on and take over your company's activities. If you don’t want to relinquish all involvement, consider staying on in an advisory role.
  • Be Acquired: Other companies might want to acquire your business and keep its value for themselves. Make sure the offered sale price meshes with your business valuation. You may even seek to cultivate potential acquirers by courting companies you think would benefit from such a deal. If you choose your acquirer wisely, the value of your business can far exceed what you might otherwise earn in a sale.
  • Sell: Selling outright can also allow for an easy exit. If you wish, you can take the money from the sale and sever yourself from the company. You may also negotiate for equity in the buying company, allowing you to earn dividends afterward — it is in your interest to ensure your firm is a good fit for the buyer and therefore more likely to prosper.

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Home » The Tony Robbins Blog » Career & Business » What is an exit strategy in business?

What is an exit strategy in business?

4 examples of business exit strategies – and how to achieve them.

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After a seven -year journey through space, Cassini went into orbit around Saturn and stayed there for 13 years. It explored Saturn’s rings and atmosphere, and the information it sent to NASA broadened our understanding of what kind of life might exist on worlds beyond Earth. A 20-year job is no joke, especially in today’s economy.

After 20 years of service, Cassini didn’t come back to Earth for retirement. No one ever wondered “ What is an exit strategy for this mission?” It had one job, and it ended its service being crushed and vaporized as it crashed into Saturn on September 15, 2017. This is how Cassini shows the real difference between having a job and having a business . You can’t leave a job behind, but you can leave a business – if you have an exit strategy.

Will you leverage your business into future success? Or will you crash and burn like Cassini? Watch the video from Tony Robbins below on how to tell the difference between a job and a business, and what life without an exit strategy looks like.

What is an exit strategy?

Exit strategy; noun: a pre-planned means of extricating oneself from a situation that has become difficult or unpleasant in a way that limits overall losses.

A business exit strategy does not have to be unpleasant, though. It can simply mean you have accomplished all you’ve set to do with your company and are ready to move on to the next phase of your life. Your goal could be that your business achieves a certain amount of growth. Another common goal is that your business becomes both sufficiently established and marketable so that you can sell it. Regardless, your business has reached a point that it is appropriate for you to move away from it, and it is now time to act on your exit strategy. Your exit strategy business plan needs to benefit you financially and emotionally and fit in with your desired legacy .

Why do I need a business exit strategy ?

Think about why you started your company in the first place. Was it so you could sit behind a desk all day issuing orders and signing contracts? Probably not. You likely envisioned how having financial freedom could make your life better. If you didn’t have to worry about money, you could travel more. You could spend more time with your family. You could pursue the interests that fulfill your soul, perhaps by giving back or learning new skills.

Your business exit strategy allows you to begin to take a step back from your day-to-day operations. It allows you to start creating a money machine that can sustain you without you setting foot in the office. And eventually, it allows you to sell your business or pass on something profitable to the next generation.

No one wants to purchase a small, unprofitable business, nor do they want to pass this type of business on. Your potential buyer wants to see a thriving company, one that has returned your investment and continues to expand. If you want to eventually sell your business and use the money to fulfill your dreams , you need to create something you can sell. That means knowing from the start that you want to sell it and knowing what a potential buyer would desire . If you don’t plan on selling it, instead leaving it to your children or passing it on in some other way, you need a business exit strategy that plans for this.

Creating an exit strategy can also help you grow your business faster and be more successful. If you are ultra-focused on selling your company, then you will set goals and make choices that will lead to the growth of your business , rather than stagnation.

Who needs an exit strategy ?

In short, everyone.

But if you don’t have an exit strategy just yet, you’re not alone. Many business owners build their companies from the ground up – and then stop. They set out to create a product or offer a service to make their business talkably different , but don’t think ahead any further than that. Why would they? Running a business is tiring work. For many business owners, the thought of leaving their business is unsettling. Because of this resistance, some business owners may never have pondered, “What is an exit strategy?” and “Should I have an exit strategy business plan?” Business owners such as these are likely driven by fear: fear of letting go, fear of failing at a new business venture, fear of retirement – the potential list goes on and on. 

what is an exit strategy in business

For many business owners, the thought of leaving their business is unsettling. Because of this resistance, some may never have pondered, “ What is an exit strategy ?” and “ Do I need a business exit strategy ?” Business owners such as these are likely driven by fear: fear of letting go, fear of failing at a new business venture, fear of retirement – the list goes on. 

Just as fear can be detrimental in other life situations , the same is true in this situation. Like Cassini, these business owners keep going and going, only to find that when they want to turn around and go back to Earth – or recoup their investment and put it toward what they want to do – they have no ability to do so. Their business might provide them income, but they can hardly walk away from it. 

Sounds like a job, doesn’t it? If you want to be a true business owner, not just an operator, you need an exit strategy.

Types of exit strategies

There are two main types of exit strategies: a business exit strategy , for owners who want to move on or retire, and an employee exit strategy, for when employees leave the company. Both have an impact on how your business is perceived and ultimately how profitable it will become.

Business exit strategy

What is an exit strategy in business ? It’s your strategy for transitioning your business to its next stage of ownership. At first, it may sound counterintuitive, especially if you are still at the beginning stages of the business. You’re pouring all you have into this new venture; making plans to exit it – seemingly abandoning it – seems like a terrible mindset for a new business owner to take.

On the contrary: While a business exit strategy isn’t like mapping out a plan for your company , it’s a critical component to your success. Most business owners have strategies to scale, to increase market share and to become profitable , but do not have a strategy to make their exit.

Employee exit strategy

Just as you need a business exit strategy when you’re ready to move on, you also need an employee exit strategy to deal with team members who resign from your company. Whether they leave because they are unhappy at work or to take on a new position that provides them the fulfillment they need, handling their exit sends an important message to your team and can help you retain or even strengthen the loyalty of your other employees.

The key to a successful employee exit strategy is to remain calm and professional, to ensure knowledge gets transferred from the employee who is leaving to whomever will take their role. An exit interview with the employee leaving, as well as interviews with those remaining in their department who are directly affected by the person’s departure, are excellent employee exit strategy tools. When you ask the right questions of both your exiting employee and those they worked with, you can use the departure as a way to improve your organizational culture .

creating an exit strategy

Key elements of a business exit strategy

Your exit strategy is more than a few thoughts you had one night or a quick discussion with your business partner . It’s a written plan of action that accounts for the following:

  • The date you plan to enact the exit strategy
  • The business valuation you will reach before exiting
  • SMART goals and an actionable plan for reaching that valuation
  • All viable options for exiting the business (such as the four examples below)
  • Potential buyers for your business

If you’re creating an exit strategy years in advance, know that things may change. Business triggers like changes in the economy and in your life will happen. Your exit strategy can actually help you stay on track by providing a clear path to follow – and you can always update it.

Examples of business exit strategies

To fully answer the question, “ What is an exit strategy ?” take a look at these four common plans and the pros and cons of each.

Exit strategy #1: Lifestyle company strategy

The lifestyle company strategy involves taking the biggest salary you can, rewarding yourself with bonuses and issuing special shares that produce very high dividends. The reasoning behind this business exit strategy is to take whatever you can from the business while it’s thriving and leaving nothing to sell once you’re ready to exit.

You can live a pretty good lifestyle and you don’t have to worry about putting a lot of thought into developing a massive action plan for growth.

You may be taxed for money you pull out and you’ll have no big pay-out when you’re ready to leave the business . You’ll also be leaving your team high and dry as your business will close when you leave.

Exit strategy #2: Liquidation

If you’re ready to call it quits and don’t owe money, you can simply close your doors and be done with the business. Liquidation is often what happens when a business fails to anticipate problems , does not have an exit strategy business plan or when things don’t go as planned, but it can be something you choose.

It’s easy and there is no need to transfer anything to new owners.

Your business ends up having no value in the end and your reputation and business relationships could suffer. Just as with a lifestyle exit strategy, your employees will be out of a job with this strategy.

Exit strategy #3: Selling to a friendly buyer

If you’ve created a business based on meaning and purpose , it’s likely that others believe in what you’re doing. When you’re ready to put an exit strategy in place, these like-minded individuals could be willing to buy it from you and continue your vision. Often, these buyers are employees, family members or colleagues. You can finance the sale over time to give them the opportunity to pay a fair market value while giving you the freedom to leave the business as they pay off the loan.

You already know the buyers and therefore less background checking is needed. You also can see your business continue to fulfill your vision.

You may end up selling it for less than it’s worth because you want to help out a friend or family member. You could also do major damage to your family or friendship if problems occur with the business and the buyer blames you.

Exit strategy #4: Acquisition

Acquisition is the most common form of exit strategy and involves finding another company to buy yours. If you seek out a strategic fit and are able to convince them of your value, you could make a tidy profit off your business.

You could get much more than what your company is actually worth, and you don’t have to worry about maintaining personal relationships with those who buy the business. Because this is the most common business exit strategy, you can find a number of professionals to help you complete the process.

Acquisitions and the subsequent transitions can be messy and uncomfortable and you may have to watch your valued employees being laid off. They can also come with non-competes or other stipulations that could make it difficult for you to start another company.

What are my next steps?

Now that you’ve reviewed the different business exit strategies, it’s time to be clear with yourself. Take the advice of business guru and marketing mogul Jay Abraham. The first thing you need to do is review your goals and priorities . Your goals for your business exit strategy may be different depending on your stage of life. Whatever your priorities may be, make sure your exit strategy is leading you toward the life you want.

Another bit of advice from Jay Abraham: Don’t value your business yourself. Instead, hire a professional to evaluate your business and all its assets to get a clear picture of its worth. This process will also help you understand which parts of your business are ripe for improvement. If you’re fortunate, you might be able to make a few minor adjustments based on the evaluation to add real value to your business before you take the next step in your exit strategy.

If your business is not as valuable as you think it could be, it might be wise to set aside six months or a year for potential adjustment. Using Jay Abraham’s internal exponential growth factors , you can potentially add real value to your business in a short time.

Now that you’ve got a clear sense of value, decide which of the exit strategies above best suits your needs. Remember, as you proceed with any deal, exercise full disclosure to potential buyers. If you withhold information, it’s possible the entire deal may fall through.

When you answer “ What is an exit strategy in business ?” and “Which exit strategies are the best fit for me?” you can be proactive in moving toward another stage of growth as you build your business.

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Exit Promise

What is Exit Planning?

by Holly Magister, CPA

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Business Owner’s Family in the Exit Planning Process

I am interested in taking over an existing swimwear store that I’ve managed for the past 15 years. The owner is elderly and is unable to keep up with demands of running the store. My intention is to purchase select merchandise from her, renew the lease in the existing storefront in my name, and incorporate my own business name. I would love to keep the name of the store, however I don’t want to be held responsible for any debt associated with the corporation name. Since I am not purchasing the business itself just the merchandise, are exiting procedures the same and as in depth as if she were selling the business to me?

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Hi Karlyn, I highly recommend you hire an experience business attorney who works with M&A transactions. That said, I can offer you my thoughts based on my M&A experiences as an advisor to business owners. When you buy a business, you’re either buying the entire business (aka a stock purchase) or you’re buying parts of the business (aka an asset purchase) . The exiting process for the business owner (and the buyer) is very similar, regardless of which path you follow. You both have a lot of work to do to do it correctly. You’ve described in your question a scenario that looks as if you intend to pursue an asset sale. In such a sale, it’s possible to acquire the brand name of the business in addition to the inventory and lease assignment. Again, you will need a seasoned M&A attorney to help you so you do not inadvertently assume the business’ liabilities too. All the best…

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I’m 68 and ready to sell an established small service business I started in the late 90s. I think approaching a competitor has definite potential. But I’m stymied. As basic as it sounds, how do I approach them?

Thumbnail: We perform property inspections for home buyers and sellers in a metro market. Gross sales of $850k and 10 employees. Approx 3% market share. Sub S corp.

We have solid systems in place and the day-to-day is run by two team members.

I’ve been thinking about selling for several years. But like many, plans were delayed by Covid. We’re still feeling the impact.

At 68 I don’t want to finance a prospective buyer so last fall I had a valuation done by a certified business appraiser. My understanding is that’s one of the things the SBA would require for a loan pkg.

… I could opt to step to the sidelines and hold onto the business for a few more years but my gut tells me it’s time to sell.

… I haven’t told my employees although they know I want to reduce my involvement. To my knowledge, none of them are potential buyers.

So back to my original question . My attorney and NDA are ready. And I doubt competitors will be surprised that I want to retire. What would be the best approach to take when I approach one of them?

Thanks in advance for your insight.

Hi Vicki, My advice would be to be careful. Very careful. Here’s a post on this very subject: Selling Your Business To a Competitor I’d be please to chat with you further, if you’d like. Here’s my calendar to set up a call.

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HI Holly, I completed as asset purchase sale of my company on Wed (Feb 5). All documents were signed and both buyer and seller satisfied with the completion of the deal. My attorney is acting as escrow agent. He wired the necessary funds to the broker per the closing statement, but now will not wire me my proceeds. Says he would like to make an adjustment to cover his bill, which we do not currently agree upon. So he’s holding up the wiring of funds to us. Is that A)legal and B) ethical?

Hi Patti, I am sorry you’ve experienced this while selling your business. Whether it’s legal to do what your attorney is doing, unfortunately I don’t know. The first place I’d look is at the engagement agreement you signed when you hired your attorney. That agreement should spell out the terms for the legal fees you were responsible for. If you don’t get any satisfaction with the matter, you could always consider filing a complaint with your state’s Attorney Disciplinary Board. Hope this helps a bit…

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want to dissolve existing corporation, but transferring all debts to new corporation to continue paying and relocating to a new facility

will the bank allow me to move my debt to a new corporation ?

Hi mei, A clue to the answer to your question may be found in your bank loan documents. Many banks lend money to the individual business owner and not the corporation or business they own. In that case, the loan may be transferable. On the other hand, banks often lend the business money and have the individual who owns the majority of the stock personally guarantee the loan. In such case, the bank would likely want the loan to be paid off and ask the owner to apply for a new loan under the new corporation. Hope this helps a bit…

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I sold my shares in an S-Corp five years ago to my business partner at the time. The business had a 15 year lease and an SBA loan, both personally guaranteed. I was recently notified by the bank that the company defaulted on the loan. Our buy/sell had a provision that the company would agree to indemnify, defend, and hold me harmless against any personal guarantees that may arise. Now they are requesting me to satisfy the defaulted loan. What recourse do I have in this scenario since I’m no longer affiliated with the company?

Hi Ryan, Any recourse you may have would be something you will need to explore with an Attorney well-versed in corporate, M&A and lending matters. You should reach out to the Attorney that represented you in the sale of your business to your former business partner. He or she should be able to assist you with this matter. If that’s not an option, we’d be pleased to make an introduction to legal counsel. Simply complete this short form and we will make the connection for you. I am very sorry you are facing this situation and truly wish you the best as you resolve it.

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Business Exit Planning: 6 Steps for a Successful Transaction

by Eric Menke | Jul 8, 2020 | Exit Planning , Financial Strategy

Business person walking through door to illustrate business exit planning.

Even though no two companies are exactly alike, the steps for exit planning are the same. I will walk you through each of the steps below. And, having bought and sold dozens of companies, both for myself and on behalf of clients, there are three fundamental concepts I’d encourage you to keep in mind.

1. Timing is everything.

Some owners look to sell their company when times get tough, but that decision may cost them. When exogenous forces affect the economy, such as Covid-19, it’s difficult for buyers to see if a business’s decline is due to external factors or intrinsic issues. This uncertainty forces most serious buyers to either step away or present lowball offers. If possible, address your challenges and build your business into a better position before pursuing an exit.

2. Buyers are more sophisticated than ever before.

In the past, it may have been possible to hide issues with your business from potential buyers. This is virtually impossible today. Modern buyers have extensive expertise and a legion of third-party experts they rely on.

3. Buyers want to buy ramp.

Ramp, in this case, refers to the future growth prospects of a business. A company with an upward trajectory commands a much higher price. As difficult as it is to step away from a growing company, I’ve done so many times. I’ve never regretted it and I’d advise you to do the same. Get your company in a strong position and sell when there’s still ramp on the table.

Now, let’s take a look at the steps involved.

The 6 Steps of Business Exit Planning

1. strategic planning (6-12 months).

The first and most crucial step of business exit planning is to define your goals, evaluate potential exit strategies, and prepare your business for a transition. This process can take anywhere from six to twelve months, depending on the scale of changes required.

Person playing chess to illustrate business exit strategy.

The most common types of exit strategies are as follows:

  • Acquisition An acquisition is when you decide to sell your business to a competitor or strategic buyer. They will either merge your company with another or grow it independently. 
  • Transitioning the Business The business owner eases out of everyday operations by handing over day-to-day responsibilities to a trusted business partner, employee, or family member. This involves a succession plan and a focus on business continuity.
  • Initial Public Offering (IPO) Listing your company on the stock market is an optimistic undertaking for those with a long-term exit plan. The purpose is to gain a significant cash infusion to fund growth initiatives and build value.
  • Liquidation This is when a business sells everything to pay off its creditors. It divides whatever remains (if anything) among its stakeholders. The decision to liquidate your business is typically a “last resort” approach employed by owners without a business exit strategy who must sell quickly.

Keep in mind that there may be additional things to consider, such as:

  • Minimizing the individual and corporate tax burden of the exchange. This may involve choosing to sell stocks vs. assets. Or, it could involve setting up tax-free exchanges or deciding between a C-Corp, S-Corp, or LLC/Partnership.
  • The future of your management team after the sale.
  • The legacy you leave behind (company values, culture, succession).

Regardless of the exit strategy you choose, it’s crucial to consider the story your company will present to potential buyers (or stockholders). And you may find it helpful to seek the advice of an independent expert, such as a fractional CFO , who can help you prepare for the eventual sale .

Buyers, as mentioned before, want to buy ramp. Companies with operational issues, declining sales, or that are perceived to have peaked receive offers in the range of 4X EBITDA (earnings before interest, taxes, depreciation, and amortization). On the other hand, a business with little-to-no-issues, strong growth opportunities, and high-quality management can command a premium of 7X EBITA – a difference of over 40%, which could equate to millions of dollars.

Preparing a company for sale – whether through cutting costs, exploring new markets, or creating new products – will take at least a year to produce meaningful results. When you start seeing positive results and believe the timing is right, you can begin the formal sales process.

2. Preparation and Packaging (2-3 Months)

Once you’ve clarified your goals and your business is in a strong position, it’s time to move on to the next step of business exit planning: hiring an investment banker to conduct the sale and/or an advisor to help navigate it. If a fractional CFO or other independent expert helped you prepare your business, they can help you choose your banker, stand in during key management meetings, and interface with potential buyers.

It is essential to hire specialists that understand your industry and have sold your type of business before — for one specific reason. They will know how to connect you to the right buyers, serious buyers who are an ideal fit for your business. 

Your advisor and banker will guide you through the process of selling your business. During this step, they will work with you and your team to develop and package your story. They will create key deliverables such as information memorandums and management presentations that demonstrate your company’s value. Then, when the time is right, they will reach out to their connections on your behalf to bring suitable, high-caliber buyers to you.

3. Targeting, Marketing, and Structuring (1-2 Months)

The benefits of an investment banker manifest when they begin reaching out to buyers. A well-run sales process says a lot about a business and will translate to higher offers.

People planning the structure of a deal.

I would caution you to avoid inexperienced investment bankers with minimal industry connections and expertise. They typically take a one-size-fits-all sales approach, which involves email blasting thousands of potential buyers, a “mass auction” of sorts. This approach diminishes the caliber of buyers that respond and wastes precious time. The quantity over quality mantra of these bankers also means they won’t bother to get to know your business intimately, making them poor representatives for your company.

Ultimately, the goal of this stage is to identify a few promising buyers to move forward with. This involves getting them to sign NDA agreements, assessing whether they are a good fit for your company, and beginning to structure the deal.

4. Term Sheet and Due Diligence (1-2 Months)

At this point in the process, the pool of buyers will be down to just a few serious contenders, who will send something called a Letter of Intent (LOI). A LOI is a formal declaration of the buyer’s desire to proceed with the purchase.

After you accept the LOI buyers will conduct their due diligence to get as complete an understanding of your company as possible. They will typically pull in third-party specialists to help crunch numbers, understand the risks, build contingency plans, and hold management meetings.

Having a stellar internal management team and investment banker will pay dividends during this step because they will represent your company in the best light by anticipating and providing answers to your buyers’ questions. Assuming there are no hidden surprises, and their findings are satisfactory, the remaining buyers proceed to the final step of the sales process.

5. Negotiation and Legalities (1 Month)

At this stage, buyers will start presenting their offers.

There are two high-level pieces to an offer: price and terms . The price is self-explanatory – it is how much the buyer is willing to pay. Terms, on the other hand, are more complicated. The terms dictate how the buyer will pay and the criteria for completing the sale.

Remember, this is a negotiation where you are seeking a win-win for both parties. Buyers typically don’t offer good prices and good terms, so business owners must be flexible. If a business owner enters negotiations with the expectation of getting everything they want, the likelihood of closing the deal is low.

This is important. When a company fails to close a deal, it creates a pall over the company that diminishes its value in future deals. Buyers often undervalue businesses that failed a sales process. They become skeptical because they don’t know if the deal folded due to issues uncovered during due diligence, a cantankerous owner, or some other concern. So, it’s best to get this right the first time.

For example, imagine a business owner who is looking to sell his business and retire. He plays a pivotal role in his company’s operation. To prevent the company from struggling in his absence, the buyer sets terms that require the owner to stay with the company for a few more years. These terms run counter to the owner’s goals, but he knows he needs to be flexible. He agrees to delay his future retirement, in exchange for a higher sales price.

Once an agreement has been reached, your banker’s team will help complete the deal. They will make it legally bulletproof and finalize any remaining conditions.

6. Navigate the Transition (6-12 Months)

When the deal has closed, your business exit planning efforts have paid off and the company handover begins. A successful transition can take anywhere from 6 to 12 months to complete. And it requires intense planning to pull it off with minimal issues. The former business owner may remain involved with the company for years after the transition, depending on the terms of the sale.

During this step, the buyer will solidify the role of the acquired business. Did they purchase the company to run on their own? Is it part of a buy-and-build strategy? Or, will they merge the company with one that already exists? It all depends on their original goals.

Regardless of the buyer’s intent, they will also evaluate and potentially change the following items:

  • Key Systems There may be a need to update, replace, or consolidate systems and software depending on the buyer’s requirements. These changes will affect all aspects of the company, from HR and accounting to manufacturing and product development.
  • Existing Management & Employees Depending on the terms of the deal, the newly acquired company will either keep members of the management team or begin replacing them. For some strategic buyers, it’s common to replace members of senior management and lay off significant portions of the workforce.
  • Reporting Processes Much like how systems and software are evaluated, so too are reporting processes. If the buyer decides to bring new software onboard, they may also need to adjust reports to accommodate changes, track new metrics, and potentially execute differently.

Business Exit Planning: Key Takeaways

The decision to exit a business should be carefully planned, considered, and executed. To maximize value and minimize disruption, business owners should seek the advice of professionals who specialize in their field. If you are considering selling your business during periods of economic turmoil, look for professionals who have weathered such events in the past such as the Great Recession (2008-2009) or the Dot Com Crisis (the late 1990s).

Remember that buyers want to buy ramp and are more sophisticated than ever. An ideal business should be profitable and have strong growth potential. If the timing isn’t right due to market conditions, the state of your business, or even the current pool of buyers, consider waiting until conditions get better.

If you have questions about how to develop an exit plan, The CEO’s Right Hand can help. Our fractional CFOs have decades of experience in buying and selling businesses across multiple industries. Get in touch with us to speak to one of our CFOs.

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Eric Menke shares over 25 years of investor, advisor and management experience with specific expertise in channel strategies, brand repositioning, logistics, industrial manufacturing and product innovation.

Prior to founding Growth Capital Management, Mr. Menke was one of the founding partners of Champlain Capital, a $148 million private equity fund focused on making private equity and growth capital investments in companies in the lower middle-market. In that role, Mr. Menke made numerous investments in the industrial, consumer products, and retail services sectors. Prior to founding Champlain Capital, Mr. Menke pursued and consummated acquisitions of small market companies on a deal-by-deal basis. Mr. Menke began his career at the investment banking firm of Kidder Peabody & company.

As Advisor of The CEO’s Right Hand firm, Eric provides strategic advisory services in change management, financial performance, mergers and acquisitions (including preparing companies for sale), marketing, business restructuring, and human resources, with an emphasis on managing risks and cost, to assist organizations in improving productivity, overall performance, and accelerate their growth.

Mr. Menke was awarded a Masters of Business Administration from the Kellogg Graduate school of Business at Northwestern University. He graduated, cum laude, with a Bachelor of Arts from the University of Southern California.

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Maximizing the value of your business to ensure a successful exit.

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Dr. Craig West is the founder of Capitaliz and has been working with business owners on succession and exit strategies for over 20 years.

Business succession and exit planning involve several critical aspects. Firstly, business owners must aim to maximize the value of their business before exiting, considering the potential risks and opportunities. With my experience helping business owners with succession and exit strategies, I've always found financial preparedness for a sale or transition equally essential, along with addressing personal goals, especially given increasing life expectancy.

As an accountant in practice, I was asked by several clients to help them prepare to retire, including selling their business. I did some research and found no process or methodology was used as the gold standard to help owners prepare for exit. I worked with several families and started to understand what the key issues were that needed to be dealt with to enable three things at the same time: the business needed to be sale- or exit-ready, the finances (both business and personal) needed to be ready to transition to retirement and, finally, the owners themselves needed to be ready for life after business.

One of the first clients I helped sold for far more than expected (because they spent years preparing) and donated $5 million to charity. They sent me a card and a copy of the receipt for the donation. I decided straight away that this was far more enjoyable and far more important than accounting and focused entirely on business succession and exit planning.

One fundamental approach I've written on previously is the 21-step process organized into five stages, all centered around value. The first stage focuses on identifying value, understanding desired outcomes and assessing the current state of the business. This involves analyzing potential issues and protecting, maximizing, extracting and managing the value of your business, ensuring financial stability for future generations. This includes investment planning for retirement, asset protection and estate planning to provide for family and future generations. Overall, these stages form a comprehensive framework for successful business succession and exit planning.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024, navigating the roadmap to business exit and succession planning.

As a business owner, you're likely aware of the importance of preparing your business for future transitions, whether that involves selling, passing it on to a family member or simply retiring. Below are the essential steps and considerations to ensure a smooth and successful exit or transition.

1. Set clear goals with the end in mind.

It's crucial to start the exit and succession planning process with clear goals. Consider answering the following questions: What do you want to achieve with your business exit? Are you looking to maximize its value, ensure its continuity with a family member or simply retire comfortably? Identifying your desired outcomes is the first step in creating a solid plan.

For example, several times I have worked with businesses with multiple owners and have seen goals entirely mismatched. Owner 1 wants to sell in ten years when they turn 70, Owner 2 is ready to go right now as they have been working 80 hours per week and Owner 3 wants to keep the business to allow her kids to take over in the future. These goals are not compatible and cannot work together without considerable discussion and rework to make sure we can get to some sort of aligned/agreed strategy.

2. Assess the current state of your business.

To prepare your business for a successful transition, it's essential to assess its current state. This includes understanding its current value, potential risks and overall standing in the market. When conducting a thorough evaluation, identify areas that may need improvement and strategies to enhance the value of your business.

3. Protect your hard-earned value.

Protecting the value you've built over the years is a critical aspect of the planning process. Financial planning discussions are essential to address questions about retirement funds, asset management, tax planning and funding gaps. It's also vital to have documentation like shareholder agreements in place to provide clarity in case of unforeseen events.

From my experience, owners seem to focus on growth and sales and not risk. The process of asset protection, risk management and documenting outcomes for unplanned events (accidents and illness) is hard work for most owners, and so it typically gets avoided. Everyone has a story, though, about an owner who got seriously ill or had a serious accident and went through a divorce or partnership dispute you don't need this until you really do need it.

4. Maximize your business value.

To make the most of your business exit, focus on maximizing its value. This involves reducing risks, improving productivity and enhancing performance. Develop strategic plans, align financial models with your strategy and ensure all aspects of your business are well-prepared to drive performance. Setting specific targets and creating a strategic plan is key to achieving your financial goals.

Keep in mind that this can take two to three years to implement properly. I can think of at least five clients who decided once this stage was completed not to exit. These businesses are now less risky, more enjoyable to run, make more money and in need of less owner time.

5. Extracting value with due diligence.

The extraction stage involves the actual liquidity event or transaction. Be sure to consider the tax implications, which can be intricate and time-consuming. Proper documentation, including due diligence materials, is crucial. Decisions on who to sell to and how to sell your business are central to this stage.

For example, I once helped a family exit a water filter business. We promoted stories in industry magazines about the rapid growth of this business and how many water coolers we had installed in the last quarter. This led to two different listed companies approaching us with an offer to buy and we used the competitive tension to increase the offers and they ultimately sold for a premium.

6. Manage your business's value post-sale or exit.

After successfully exiting, it's vital to manage the value you've extracted. Think about where to invest to secure your financial stability during retirement. Additionally, consider asset protection and estate planning to provide for your family and future generations.

A successful business exit and succession planning requires careful consideration of your goals, an assessment of your business's current state, value protection, value maximization and strategic extraction. By following these steps, you can pave the way for a prosperous and secure transition, ensuring your hard-earned legacy lives on.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

Craig West

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Business Owner Exit Strategies: 3 Options for Business Maturity

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Much of the conversation around entrepreneurship focuses on the beginning phases of a company: the idea, the conceptualization, the launch, the startup and the business's growth. These early phases of business ownership are full of excitement, moments of inspiration, motivation and risk-taking.

When getting into business, focusing on growing a business and managing the day-to-day, many entrepreneurs never even consider what the end-game looks like – when the business will enter maturity and, when the time comes, how his or her role in the business will end.

How to Recognize the Final Life Cycle Stage, Business Maturity

Every successful business develops throughout a business life cycle . This life cycle begins with the development and start up of the company and undergoes stages of growth and expansion before arriving at maturity and the business owner's potential company exit. At maturity a business typically has:

  • an established, clear and proven business model and company vision
  • explored and navigated many growth and expansion phases
  • stable profits year after year

At maturity, business owners must consider additional opportunities for expansion of the business in order to sustain steady growth and profits. At this point, business owners face a decision: whether or not they are up for the task of managing another growth cycle. If owners find they are not willing to meet the challenge and stress of expansion, then a transition must occur.

Take a quick assessment See the strengths and weaknesses in your business's  financial management

Three Solid Strategies for Business Exit at Maturity

After successfully navigating many phases of growth and sustainability, a transition occurs once the business has entered maturity. That transition is known as a business owner's exit strategy. Following maturity, the company's future decline or renewal depends entirely on the way a business owner plans to exit the company.

As a business owner without a solid strategy for exit, you should expect the imminent decline and failure of the company into which you poured your heart, soul, sweat and time. You do not, however, have to endure or accept the demise of your business simply because you are ready to retire or can no longer work. With a solid exit strategy, you can preserve the success of your company, the enduring legacy of your initial inspiration and the fruit of your labor.

Exit Strategy One - Sell the Business

When exiting a business, an owner might decide to sell the company, relinquishing all ownership and control, while collecting a nice lump of retirement cash. If selling is your preferred exit strategy, be sure to start the exit plan at least five to seven years before your target retirement or sale date. During this time, establish job security for your existing employees, engage a knowledgeable CFO for tax strategies and use actionable financial data to increase your company's free cash flow to build the value of your business.

Exit Strategy Two - Transition Business Management

Only about 30% of family businesses survive the transition of ownership from the first to the second generation, and less than half of second-generation companies survive the ownership transition to the third generation. There are a long list of reasons why generational success is so difficult to achieve, but there are steps you can take – whether transitioning the business to the next generation or new, un-related management – to ensure the success of your successors

  • Make sure your successors are capable of managing the business. Do they understand the ins and outs of the company, your role and their new responsibilities?
  • Have a smart back office in place and make sure your successor understands how to use actionable financial data. This ensures new management makes smart, data-driven decisions, rather than managing with gut-feeling, reactionary choices.
  • Thoroughly document all company policies and procedures .

Exit Strategy Three - Continue Working with a Plan in Place

Perhaps you want more time to increase business value before selling or to educate your successor before handing over the reins. Maybe you love what you do and want to continue working so you can die happily at your desk. Regardless of your reasons, if you will continue working, then you need to have a plan for management transition in place once your business reaches maturity. (Better yet, you will have a strategy long before the company reaches maturity.)

Consider what you want your role to be while you continue working. You can choose to remain just as involved as you are currently, or you might like to take on a role that allows you more free time to enjoy your family, friends and hobbies.

With an established, strong back office that provides a solid financial foundation, your role can shift to one of overseeing the rest of the company while everything else functions on its own. You can continue to use your knowledge and experience to provide valuable management insights, collaborate with your future successors, and to enhance the decision-making process.

While continuing to work, be sure to establish a plan for your final, complete exit out of the company. This means preparing the business financially and considering what will happen to the company, its cash flow, employees, and its customers and clients.

5 Mistakes to Avoid at Business Maturity

  • Not Having an Exit Strategy - Whether you are 25 or 95, you and your company will suffer if you fail to make an exit strategy. Even if you do not anticipate retiring, selling or leaving your company anytime soon, you should have a strategy and plan in place with instructions in the event you become unexpectedly incapacitated.
  • Not Communicating Your Plan - Periods of transition generate incredible amounts of stress and uncertainty among employees in a business. Clearly communicating your exit strategy, potential changes, and what this transition means for your employees is imperative to maintaining positive morale and stability during the transition.
  • Not Creating Job Security - Your employees and their collective knowledge are your company's greatest assets. Do everything you can to ensure job security for your existing staff.
  • Not Having a Financial Strategy - Prior to exiting, or beginning to exit, your company, has a financially oriented plan in place. This includes tax planning, management accounting protocols, written policies and procedures and a strategy to increase business value before your last day.
  • Not Building Company Value - Increasing company value will put your business in the best position going forward – regardless of your intended exit strategy.

Management Accounting for Business Maturity and Every Stage of the Business Life Cycle

With advice and guidance from an experienced management accountant or strategic CFO , you can establish a viable exit strategy and ongoing business plan for your company. Management accounting allows business owners to seamlessly transition roles in their companies, exit gracefully, and hand the reins over to new management with peace of mind. With historic, current, and forecasted actionable financial data at their fingertips, your successors will be able to make the data-driven decisions necessary to maintain, grow and expand your company and your business legacy well into the future.

Poor Financial Management Could Be Your Business's Downfall

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Leaving No Stone Unturned: How to Maximize Your Exit Strategy with Ted Jenkin (Ep. 54‪)‬ Always On with Duncan MacPherson

Want to receive maximum value for the business you’ve worked so hard to build? The key lies in being proactive with your exit strategy. Dive into a thought-provoking conversation between Duncan MacPherson and returning guest Ted Jenkin, CEO of oXYGen Financial and president of Exit Stage Left Advisors. Together, they uncover practical insights to streamline … Continue reading Leaving No Stone Unturned: How to Maximize Your Exit Strategy with Ted Jenkin (Ep. 54) →

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Inside Project Osceola: Florida State sports’ 9-figure private equity plan

  • Matt Baker Times staff

The first known mention of the two-word phrase that could revolutionize Florida State sports sits on the top of the third page of a cash projections spreadsheet from September 2022.

Project Osceola.

The name is a nod to the Seminoles’ spear-planting symbol . The project is a potential nine-figure private equity investment into FSU sports that could accelerate conference realignment and touch everything from the Tampa Bay Lightning to Minor League Baseball.

After the sports business website Sportico first reported FSU’s private equity talks in August , the Tampa Bay Times requested public records from the Seminoles. The Times received more than 2,500 pages last week.

The resulting picture is riddled with redactions and tantalizingly incomplete. Some of the most interesting tidbits are only semi-related — like a potential date for FSU to leave the ACC and a naming sponsor for Doak Campbell Stadium. It’s possible nothing ever materializes beyond due-diligence checklists and presentations labeled “strictly private and confidential.”

But the emails, PDFs and spreadsheets still provide the deepest, albeit preliminary, glimpse of the complex legal theories, detailed financial discussions and groundbreaking possibilities of Project Osceola.

How a private equity investment at FSU might work

The best explanation comes in a September 2022 email from Ken Artin, a public finance attorney at the firm Bryant Miller Olive. State agencies, he wrote, generally can’t become a “joint venture partner, equity partner and anything that looks like that” with a for-profit company. But there’s a workaround, which he called a “super license agreement.”

FSU can move its intellectual property (like logos and names) to a new university entity. That new entity could license the intellectual property to someone else (a private-equity firm). The firm would then try to profit off that licensed material by using it better, more efficiently or in new ways.

Within six months, that proposed non-profit entity had a name: FSU NewCo. The specific intellectual property available from FSU NewCo is redacted.

The companies involved

In August 2022, FSU and J.P. Morgan signed a non-disclosure agreement to work on a deal with outside investors. At least two private-equity firms were interested.

One was Arctos, whose sports portfolio includes a share of the Lightning and Red Sox . The other was Sixth Street, which has a stake in the San Antonio Spurs and the sports entertainment company Legends Hospitality .

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FSU signed an exclusivity deal with Sixth Street over the summer.

Financial terms

They’re almost all redacted, beyond a few peeks.

In November 2022, at least two scenarios had $250 million in private equity.

A second set of figures comes from an “ACC Upside” model in January 2023. It lists a $75 million initial investment plus a $50 million “follow-up equity investment” four years later. By 2032, it projects FSU’s 2032 cash flow to be $197 million — $46 million more than the “No Investment” scenario.

An email from an attorney at Davis Polk & Wardwell outlines FSU’s proposals in June: $25 million upfront, another $125 million under redacted circumstances plus up to $200 million in future debt “without consent and without additional limitations.”

Beyond the cash injection, FSU’s goals (as laid out in an October 2022 presentation) included maximizing revenue opportunities to stay nationally competitive, modernizing management structure, ensuring flexibility in any deal and conducting the process in a way that protects FSU “from negative reaction from important constituents.”

How FSU would use the money

It’s unclear. Arctos and Sixth Street both wanted “a more concrete answer” in March.

As FSU considered $250 million scenarios, athletic director Michael Alford and a school financial administrator, Michael Williams, wanted the money upfront for capital projects. J.P. Morgan’s Todd L. Smith responded that FSU “will ‘owe’ investors a return on that,” so “collecting it all up front if we don’t have immediate need or use will ‘cost’ something.”

Paying off debt would make it easier to divvy up revenue between investors and FSU, according to discussion materials from September 2022. FSU has since approved $265 million in additional debt to renovate Doak Campbell Stadium.

Additional operating expenses were also mentioned, and a June discussion included an initial purchase and “General Basket” of money FSU could use on anything.

Could private equity fund FSU’s ACC exit?

FSU redacted or withheld records as the school and conference litigate the Seminoles’ potential half-billion-dollar exit from the league. But FSU’s ACC future pops out of bars of black; one review featured a “General Basket” and unexplained “Conference Basket.”

One of the “next steps” listed in October 2022: “Determine use of proceeds, especially in a ‘no realignment’ scenario.” By January 2023, there was a “Leave ACC” budget model. Its commentary is partially redacted, but conference payouts spike from $43 million in 2025 to $96.4 million the next year .

Football ticket revenue for home games jumps, too. Its 2026 projections are $18.6 million — $3.2 million more than the “Base Case” — in part because of “post-ACC-exit ticket prices in-line with peers.”

Sixth Street’s due diligence tracker had a March request for conference payout details in the “base case and conference change case.”

Naming rights to Doak

Projections for 2026 include naming rights to FSU’s football home, formally called Bobby Bowden Field at Doak S. Campbell Stadium. FSU’s Year 1 revenue ranges from $1.5 million to $5 million, depending on the document and its assumptions. Sponsorship for the basketball arena, the Donald L. Tucker Civic Center, adds another $800,000-$2.6 million.

USF (Yuengling Center), Florida (Exactech Arena) and UCF (FBC Mortgage Stadium) are among the state teams with corporate names on their buildings. Last season, Georgia Tech tacked on Hyundai Field to the name of its century-old Bobby Dodd Stadium.

Multiple budgets add a concert series at Doak (four shows with 50,000 spectators each, according to an August model). FSU eventually expects these two revenue streams to top $10 million per year.

Minor League Baseball in Tallahassee?

That’s a possibility, according to a 10-year projection the sports consulting firm Navigate presented in 2022. The document lists a $75 million expense for FSU in the 2027 fiscal year for a new baseball stadium; the Seminoles’ Dick Howser Stadium is four decades old. FSU’s baseball revenue nearly doubles to $2.75 million.

A new revenue source also appears in ’27: “Minor League Baseball Team.” It initially adds a combined $4.1 million in tickets, sponsorship/licensing and facilities. The idea is cited in at least one other document but never detailed.

Name, image and likeness

Multiple documents cite $8 million in name, image and likeness (NIL) contributions for the ’24 fiscal year. One scenario ups that figure by 2-3% each year. In another, donations spike to $11.1 million in ‘25 and $13.6 million by ‘32.

These numbers are notable because they’re an official snapshot in a murky marketplace filled with unverifiable, third-party claims. They’re also relevant to Project Osceola; Sixth Street asked about FSU’s NIL partnerships and “plan moving forward” in July.

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Matt Baker is a sports reporter covering college sports and recruiting. Reach him at [email protected].

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Highlights From the Successful Lunar Landing of the Spacecraft Odysseus

A mission from Intuitive Machines of Houston overcame last-minute difficulties that engineers had to work around. The company said the first privately built vehicle to make it to the moon “is upright and starting to send data” back to Earth.

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Kenneth Chang

Kenneth Chang

For the first time since 1972, an American-built spacecraft is on the moon’s surface.

For the first time in a half-century, an American-built spacecraft has landed on the moon.

The robotic lander was the first U.S. vehicle on the moon since Apollo 17 in 1972, the closing chapter in humanity’s astonishing achievement of sending people to the moon and bringing them all back alive. That is a feat that has not been repeated or even tried since.

The lander, named Odysseus and a bit bigger than a telephone booth, arrived in the south polar region of the moon at 6:23 p.m. Eastern time on Thursday.

The landing time came and went in silence as flight controllers waited to hear confirmation of success. A brief communication pause was expected, but minutes passed.

Then Tim Crain, the chief technology officer of Intuitive Machines, the Houston-based company that built Odysseus, reported that a faint signal from the spacecraft had been detected.

“It’s faint, but it’s there,” he said. “So stand by, folks. We’ll see what’s happening here.”

A short while later, he announced, “What we can confirm, without a doubt, is our equipment is on the surface of the moon and we are transmitting. So congratulations.”

Later, he added, “Houston, Odysseus has found its new home.”

But with the spacecraft’s ability to properly communicate still unclear, the celebration of clapping and high-fives in the mission control center was muted.

Later in the evening, the company reported more promising news.

“After troubleshooting communications, flight controllers have confirmed Odysseus is upright and starting to send data,” Intuitive Machines said in a statement. “Right now, we are working to downlink the first images from the lunar surface.”

While this venture was much more modest than the Apollo missions that led to astronauts walking on the moon, the hope at NASA was that it could help inaugurate a more revolutionary era: transportation around the solar system that is economical as far as spaceflight is concerned.

“I think it is a smart thing that NASA is trying to do,” said Carissa Christensen, chief executive of BryceTech, a space consulting firm, “which is to essentially create a competitive ecosystem of providers to meet its needs.”

Intuitive Machines is one of several small companies that NASA has hired to transport instruments that will perform reconnaissance on the moon’s surface ahead of the return of NASA astronauts there, planned for later this decade .

For this mission, NASA paid Intuitive Machines $118 million under a program known as Commercial Lunar Payload Services, or CLPS, to deliver six instruments to the moon, including a stereo camera that aimed to capture the billowing of dust kicked up by Odysseus as it approached the surface and a radio receiver to measure the effects of charged particles on radio signals.

There was also cargo from other customers, like a camera built by students at Embry-Riddle Aeronautical University in Daytona Beach, Fla., and an art project by Jeff Koons. Parts of the spacecraft were wrapped in reflective material made by Columbia Sportswear.

Odysseus left Earth early on Feb. 15 aboard a SpaceX rocket. It pulled into lunar orbit on Wednesday.

The lead-up to the landing included last-minute shuffling.

After the spacecraft entered lunar orbit, Intuitive Machines said it would land on the moon at 5:30 p.m. on Thursday. On Thursday morning, the company said the spacecraft had moved to a higher altitude and would land at 4:24 p.m.

Then on Thursday afternoon, the landing time changed again, with the company saying that an extra lap around the moon would be needed before the 6:24 p.m. landing attempt. A company spokesman said a laser instrument on the spacecraft that was to provide data on its altitude and velocity was not working.

The extra orbit provided two hours for changes in the spacecraft’s software to substitute a different, experimental laser instrument, which had been provided by NASA.

At 6:11 p.m., Odysseus fired its engine to begin its powered descent to the surface. The laser instrument appeared to serve as a suitable fill-in, and everything appeared to be working until the spacecraft went silent for several minutes.

The landing site for Odysseus was a flat area near the Malapert A crater, about 185 miles north of the moon’s south pole. The moon’s polar regions have attracted much interest in recent years because of frozen water hidden in the shadows of craters there.

Getting to the moon has proved to be a tricky feat to pull off. Other than the United States, only the government space programs of the Soviet Union, China, India and Japan have successfully put robotic landers on the moon’s surface. Two companies — Ispace of Japan and Astrobotic Technology of Pittsburgh — had previously tried and failed, as has an Israeli nonprofit, SpaceIL.

In an interview before launch, Steve Altemus, the chief executive of Intuitive Machines, said he hoped NASA would persevere with the moon-on-a-budget mindset even if Odysseus crashed.

“It’s the only way to really go forward,” he said. “That’s what this experiment is supposed to do.”

In the past, NASA would have built its own spacecraft.

Before Neil Armstrong became the first person to set foot on the moon, NASA sent a series of robotic spacecraft, Surveyor 1 through Surveyor 7, to validate landing techniques and examine the properties of the lunar soil. Those robotic landings allayed concerns that astronauts and spacecraft would sink into a thick layer of fine dust on the moon’s surface.

But when NASA designs and operates spacecraft itself, it generally seeks to maximize the odds of success, and its designs tend to be expensive.

The Apollo moon landings from 1969 to 1972 became a paradigm for a colossal program that tackled a problem nearly impossible to solve with a near-limitless budget — the proverbial moonshot — while CLPS seeks to harness the enthusiasm and ingenuity of start-up entrepreneurs.

Thomas Zurbuchen , a former top NASA science official who started the CLPS program in 2018 , estimated that a robotic lunar lander designed, built and operated in the traditional NASA manner would cost $500 million to $1 billion, or at least five times as much the space agency paid Intuitive Machines.

NASA hopes that capitalism and competition — with companies proposing different approaches — will spur innovation and lead to new capabilities at lower costs.

But even if they succeed, these companies face uncertain business prospects attracting many customers beyond NASA and other space agencies.

“It’s not obvious who those other customers might be,” Ms. Christensen said.

Intuitive Machines has contracts for two more CLPS missions, and other companies are expected to take their shots at the moon, too. Astrobotic Technology, the Pittsburgh-based company, has a second mission in preparation to take a robotic NASA rover to one of the shadowed regions where there might be ice. Firefly Aerospace, near Austin, Texas, has its Blue Ghost lander mostly ready but has not yet announced a launch date.

Why did the bill to NASA grow by tens of millions of dollars?

In May 2019, NASA announced that it would pay Intuitive Machines $77 million to send five payloads to the moon.

Intuitive Machines and other companies in its Commercial Lunar Payload Services program, or CLPS, have signed fixed-price contracts to deliver NASA payloads to the moon. Such contracts mean that if something goes wrong and costs increase, generally it is the companies, and not NASA, that would cover the difference.

But by the time Intuitive Machines made it to the moon on Thursday, NASA said it was paying the company nearly $118 million, an increase of close to 50 percent. What happened?

The main reason is that NASA changed its mind about where it wanted to go and how much it wanted to send. That is like remodeling your home and then deciding midway through the project that you want a fancier bathroom. The contractor is going to charge you for that.

NASA originally wanted Intuitive Machines send its Odysseus mission land in an easier-to-reach spot in the equatorial region of the moon called Oceanus Procellarum. It is a huge, scientifically intriguing dark spot on the near side of the moon.

However, with future missions that will take astronauts toward the moon’s south pole region, NASA wanted the Intuitive Machines lander to take an early look. Thus, NASA asked Intuitive Machines to change the landing site for Odysseus to a location near a crater named Malapert A, the farthest south that any lunar lander had targeted. That change cost an extra $28.4 million.

NASA also added almost $12 million to compensate for disruptions that companies experienced during the coronavirus pandemic and for changes in what it was sending on the mission.

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Michael Roston

Michael Roston

In a post on the social media site X, Intuitive Machines just announced that “Odysseus is upright and starting to send data.” The company said it is working on bringing the spacecraft’s first images from the moon’s surface to Earth.

Tim Fernholz

Tim Fernholz

The entrepreneur who helped start Intuitive Machines has more plans for private space exploration.

Much of the American space program is run out of nondescript offices in the Washington, D.C., suburbs. That’s where Kam Ghaffarian, the billionaire space entrepreneur, could be found recently on an auspicious day. Exactly 47 years before, he had immigrated to the United States from Iran. Mr. Ghaffarian, 66, sat at a table made of gently glowing white onyx, also from Iran.

Just a few weeks later, Mr. Ghaffarian’s company, Intuitive Machines, did something no private organization has ever done: Touched down softly on the surface of the moon .

Mr. Ghaffarian specializes in moonshots. His array of companies includes not just the one that sent a lander to the moon on Thursday, but also one building a space station to put in orbit around the Earth, another designing advanced nuclear reactors, a venture fund and a nonprofit studying faster-than-light travel technology. His projects are the kind that Silicon Valley frets about having given up on. They are bets on tangible technology, not software, where metrics like hits and clicks are replaced with the hard questions of physics.

And while bombastic billionaires like Elon Musk and Jeff Bezos have captured attention for their efforts to launch futuristic reusable rockets, the lower-profile Mr. Ghaffarian’s companies have helped answer the question of what to do with them, becoming crucial in the increasingly close partnership between NASA and private industry. SpaceX’s key innovation has been building rockets that have brought down the cost of going to space. Mr. Ghaffarian’s firms are using those cheap rockets to commercialize space activity in ways that Mr. Musk’s SpaceX hasn’t pursued, while Mr. Bezos’ Blue Origin has yet to reach orbit.

Mr. Ghaffarian is a believer in that public-private model. “If you look at cars or planes and all of that, there were entrepreneurs who created that and changed the game, right?” he said. “What comes to mind is Henry Ford or Howard Hughes.”

In a post on the social network X, Thomas Zurbuchen, the former NASA official who helped start the program that paid for the scientific devices aboard Odysseus, called the mission “a huge initial success for the landing, a true space and commercial milestone.” He wished Intuitive Machines and NASA officials luck as they sought scientific results and data from the mission.

The next spacecraft heading to the moon could be from China.

After Intuitive Machines’ Odysseus lander, the next spacecraft to head to the moon may be Chang’e-6 from China, which will try to add to the country’s cache of lunar rocks and soil.

The China National Space Administration has announced that the launch is scheduled for sometime during the first half of this year. Chang’e-6 is essentially a repeat of Chang’e-5 , which in 2020 returned the first set of moon samples to Earth since the 1970s, though they were from a different part of the moon.

Chang’e-5 landed at Mons Rümker, a volcanic plain on the near side of the moon. Mons Rümker is much younger than the sites investigated by NASA’s Apollo astronauts and the Soviet Union’s Luna robotic landers, which also returned rock samples to Earth. Planetary samples were keen to perform precise dating based on radioactive elements in the rocks. Using that data helps calibrate techniques for estimating the ages of geological surfaces on planets, moons and asteroids throughout the solar system.

The destination for Chang’e-6 is a spot on the far side of the moon within the 1,500-mile-wide South Pole-Aitken basin, the scar of an immense impact more than 4 billion years ago. Planetary scientists speculate that the impact might have been so violent that some of the moon’s mantle, usually located miles under the crust, could have been ejected onto the surface.

Chinese scientists expect to find rocks of a wide range of ages at the landing site.

China has more ambitious moon plans. It has announced that it is aiming to land its astronauts on the moon by 2030 and that it wants to build a lunar base near the south pole. So far, all of the Chinese lunar missions have succeeded — a stark contrast to the struggles of others aiming to land on the moon.

There are more private landers headed to the moon.

Whatever the state of Intuitive Machines’ spacecraft on the surface of the moon, it certainly will not be the last private company to try to get there. In fact, following this mission, it may even be the next company to try again.

A second Intuitive Machines mission aims to send a lander of the same design as Odysseus to another site near the south pole, not far from the 13-mile-wide Shackleton Crater, where water ice may be found below the surface. This lander, which is also part of NASA’s Commercial Lunar Payload Services program, will carry three technology demonstrations for NASA, including a drill that will attempt to bore three feet into the ground.

Ispace, a Japanese company, failed on its first landing attempt in 2023. Its second moon mission will uses a lander nearly identical to the one that crashed, with fixes to its software to avoid another crash. It will carry a small rover.

Astrobotic, which tried and failed to reach the moon earlier this year, is currently scheduled to carry VIPER, a NASA rover costing more than $400 million, to the south pole region later in 2024. Given that VIPER requires a new, larger lander and that Astrobotic remains unproven at landing on the moon, NASA could decide to delay the mission, which will play a key role in exploring the permanently shadowed craters before its astronauts explore them during future missions.

Another company joining the rush to the moon is Firefly of Cedar Park, Texas. It is planning to launch its Blue Ghost lunar lander on a SpaceX Falcon 9 rocket in the middle of this year.

As with the Intuitive Machines mission, NASA is the primary customer for the Firefly flight, paying Firefly at least $93 million under the CLPS program to take 10 instruments weighing about 330 pounds to Mare Crisium, a dark volcanic plain on the near side of the moon.

Mr. Crain said Odysseus is definitely on the moon and operating but it remains to be seen whether the mission can achieve its objectives.

Tim Crain, the chief technology officer who is leading mission control, said, “We’re not dead yet,” referencing a line from Monty Python and the Holy Grail. He said they are receiving a faint signal from the spacecraft’s high-gain antenna.

It’s possible that Odysseus has crashed. It’s also possible there’s just a communications glitch.

Flight controllers are going through the last data they received, looking for clues about whether it’s a communications glitch or a more serious issue. Three minutes have passed since the expected landing time.

Still waiting to hear from the spacecraft.

A short interruption in communications was expected.

The expected time of landing has come and passed. Now flight controllers wait for the spacecraft to get back in touch.

The lander is deciding where it will land. Less than one minute.

The lander has performed the “pitchover” maneuver to a vertical orientation needed for a safe landing

There is a long pause after a request for the altitude.

Two minutes until touchdown.

Three minutes until landing time.

Even if the landing is successful, it’ll take a little bit — from 15 seconds to several minutes — before confirmation that it is safe on the surface. A short hiccup in communications after landing would not be necessarily worrisome.

The propulsion system is operating properly.

10 minutes until planned landing time.

Everything seems to be going well so far as we watch an animation of the landing.

The Odysseus lander has started its power descent. This is a 11-minute engine burn to slow down from 4,000 miles per hour. It is now on a path of no return to the lunar surface.

A mixed record for moon landings this year.

So far in 2024, humanity is one-for-two when it comes to landings of robotic spacecraft on the moon, though even the successful one, by JAXA, the Japanese space agency, was not quite perfect.

The Japanese spacecraft, Smart Lander for Investigating Moon, or SLIM, launched in September. Taking a long, slow but fuel-efficient path to the moon, it fired its engines to head to the surface on Jan. 19.

The main mission of SLIM was to test a vision-based navigation system and efficient computing algorithms, each designed to set the spacecraft within about 100 yards of a desired landing site. That is much better accuracy than technology on earlier spacecraft, where the uncertainty could be many miles.

JAXA officials said that SLIM’s technology appears to have met its objectives for a precision landing, with the spacecraft arriving intact at the surface. Japan thus became the fifth nation to successfully put a spacecraft on the moon.

But, just before landing, about 150 feet above the lunar surface, one of SLIM’s two main engines appears to have failed. The other engine attempted to compensate, but SLIM ended up tipping into an awkward position, with its engine nozzle pointed upward to space.

SLIM was still able to send radio signals back to Earth, telling JAXA officials that it had arrived. But its solar panels were facing the wrong direction, away from the sun, and the battery ran out of power less than three hours after landing.

As the sun shifted and struck its solar panels nine Earth days later, SLIM revived. The spacecraft was able to take some photographs and perform some measurements on nearby rocks before the sun set and SLIM again fell silent.

Another mission’s outcome was more clear-cut.

On Jan. 8, a lunar lander built by Astrobotic Technology of Pittsburgh headed to space carrying payloads for NASA, much like Intuitive Machines’s lander. But soon after it separated from its rocket, the lander suffered a major malfunction of its propulsion system.

As a result, it never even got close to the moon. Instead, when it swung back toward Earth, it ended up burning up in the atmosphere over the Pacific Ocean.

Intuitive Machines said the original laser instrument it planned to rely on for guidance during descent is not working. The two-hour delay from the extra orbit allowed the uploading of updated software to use a LIDAR instrument provided by NASA instead. NASA's LIDAR instrument was intended to be experimental, not operational but it turns out to be a very handy backup.

What will happen as Odysseus tries to land on the moon.

Intuitive Machines had a landing plan for Odysseus that it announced in recent weeks. In the past day, that plan has changed substantially.

It started with an engine burn last night, which shifted the spacecraft to an elliptical orbit.

That adjusted orbit moved up the landing time but then flight controllers decided to make an extra orbit around the moon, pushing the landing time back by two hours.

At 6:11 p.m. Eastern time, the engine on Odysseus will start up again, and the spacecraft will begin its powered descent, slowing itself down. This will be the point of no return, and the spacecraft will be operating entirely on its own.

At 6:22 p.m., it will pivot to a vertical position.

Odysseus will track its position through a camera, matching the patterns of craters with stored maps and measuring its altitude. During the broadcast covering the landing, an Intuitive Machines spokesman said flight controllers decided to use a NASA lidar instrument to provide guidance and navigation during descent instead of a laser altimeter on the spacecraft.

Sensors will look for a safe spot, away from boulders and steep slopes.

For the last 50 feet or so of the descent, Odysseus will rely solely on its inertial measurement units, which act as the spacecraft’s inner ear, measuring the forces of acceleration. It will stop using the camera and the altitude-measuring laser to avoid being fooled by dust kicked up by the engine’s exhaust.

Intuitive Machines expects a 15-second delay after touchdown before it will be able to determine whether it is the first private company to land successfully on the moon.

It should be 6:24 p.m.

NASA and Intuitive Machines have started a joint video stream from Houston, where the company has its headquarters. You can watch it in the video player embedded above, and watch Times journalists here for analysis of the moon landing attempt over the next 90 minutes.

Intuitive Machines has not publicly given a reason about why it decided Odysseus needed to make an extra orbit around the moon, delaying the landing by two hours. This is pure speculation but it’s conceivable that the additional orbit would pass closer to the desired landing site, or perhaps flight controllers felt they needed more time for preparations or troubleshooting. There is no downside to waiting a little bit longer.

How Odysseus will take selfies while it lands.

When Intuitive Machines’ Odysseus lander is still about 100 feet over the surface of the moon, it will eject a small box.

That box is EagleCam, a system of cameras built by students at Embry-Riddle Aeronautical University in Daytona Beach, Fla. As it falls to the surface, the device will snap photos of Odysseus landing on the moon's surface — a sort of space selfie.

If it works, it will be the first student-built project to operate on the moon.

The $350,000 project resulted from a visit to Embry-Riddle in 2019 by the chief executive of Intuitive Machines, Steve Altemus, who is an alumnus of the university.

Mr. Altemus challenged the students to build a payload “with the goal of taking the first third-person view of a spacecraft landing,” said Troy Henderson, a professor of aerospace engineering. “So that was the starting point.”

During the final descent of Odysseus on Thursday, a spring will push EagleCam away from the spacecraft, and as the instrument falls — it will track its motion but lacks any propulsion to turn or move itself — three cameras with wide fields of view will be taking pictures.

“No matter what happens, if we slide or tumble or anything like that, one of those three cameras will see the lander,” Dr. Henderson said.

Even after EagleCam hits the ground at about 25 miles per hour, it should continue taking photographs. The students performed drop tests of a model of EagleCam into a sand pit with several inches of material simulating lunar soil on top. The test version survived.

“We’re pretty confident that we’ll be OK,” Dr. Henderson said.

One key to the success of EagleCam is that Odysseus has to land in operating condition, too. The Embry-Riddle device will send the photos to the lander, which will then relay them to Earth.

It was not a simple project.

“We were in the throes of design during Covid,” said Christopher Hays, a doctoral student who served as the lead engineer for EagleCam. “So how did we adapt to design a camera that was going to the moon while we were all on Zoom at our houses?”

The pandemic disrupted supply chains, adding more challenges. “We actually ordered a pack of screws from a company, and it came in nine months later,” Mr. Hays recalled. “Some of our initial budgets were off.”

There was also continual turnover as students graduated. “Then we had to kind of backfill and make sure that the new students knew what they were doing,” Mr. Hays said.

As landing approached, Mr. Hays said he was excited and confident. “There’s a peace knowing that it’s kind of out of our hands now,” he said. “We just have to trust the system to do what it’s built to do.”

Within a few hours after landing, Mr. Hays expects to find out how EagleCam did and, he hopes, see the photos it took.

An earlier version of this article misspelled the surname of the EagleCam’s lead engineer. It is Hays, not Hayes.

How we handle corrections

A quick flight to the moon for Odysseus.

On Feb. 15, a SpaceX Falcon 9 rocket sent Odysseus on a trajectory toward the moon. The journey was short by the standards of recent lunar missions, which took more gradual, fuel efficient journeys to the moon. India’s successful Chandrayaan-3 mission traveled for more than a month, and the journey of Japan’s SLIM mission lasted more than four months before reaching the lunar surface in January.

After Odysseus separated from its rocket, it successfully turned itself on. An initial engine burn to test the propulsion system was postponed because the liquid oxygen propellant took longer to chill down than ground-based tests had predicted.

Time lapse of a 5 ¾ hour journey: @Int_Machines IM-1 lunar lander #Odysseus and the tumbling #Falcon9 upper stage a distance of almost 290,000 km. Recorded from our station in South America. pic.twitter.com/q1LUKX213F — s2a systems (@s2a_systems) February 17, 2024

Engineers adjusted the ignition procedures, and the burn was successfully performed on Feb. 16.

Along the way, the spacecraft transmitted photographs taken of both Earth and the moon.

Flight controllers fired the engine twice more, on Feb. 18 and Feb. 20, to fine-tune the spacecraft’s path to the moon. The second effort was precise enough that the flight controllers decided to skip a planned third correction.

Odysseus is now in a circular orbit above the surface of the moon. It had been 57 miles up, but Intuitive Machines said on Thursday morning that it had raised the spacecraft’s orbit to a higher altitude, which it did not specify. Then on Thursday afternoon, it announced the spacecraft needed to take another lap around the moon before heading to the surface at a later hour.

If the company sticks to the current plan, about an hour before the scheduled landing time of 6:24 p.m. Eastern time, a final command will start the lander’s journey toward the surface.

When will Odysseus actually land on the moon? We keep getting surprised. Intuitive Machines just shared an update that the landing time is now scheduled for 6:24 p.m. Eastern time. The company had originally said 5:49 p.m., then 5:30 p.m. Then an update this morning said it was moved up to 4:24 p.m., perhaps because the spacecraft ended up in an orbit lower than what had been planned, and was moving faster than anticipated. Now, flight controllers decided to circle the moon one additional time before landing.

On the moon’s south pole, a quest for ice.

If you want to send astronauts to the moon, a place with water would be a good destination.

Obviously, humans need to drink water to survive, and water molecules can be split into hydrogen and oxygen. Oxygen provides air to breathe, and hydrogen and oxygen can also be used as rocket propellants to return home to Earth, or to travel somewhere else in the solar system.

But water is heavy, and lugging it from Earth is expensive and inconvenient.

The rocks brought back by NASA’s Apollo astronauts from 1969 through 1972 suggested that the moon was completely dry. But then, planetary scientists started seeing hints of water ice at the bottom of craters in the polar regions where the sun never shines. India’s first lunar orbiter, Chandrayaan-1 , collected some of the data that confirmed the presence of water.

An armada of missions headed to the lunar south pole aim to measure how much water is contained in the shadowed craters and how difficult it would be to extract it. (It could be very difficult if the water molecules are trapped within minerals, rather than as ice mixed in with the soil.)

Layers of ice in the craters could also provide a history of the solar system, much like how ice cores in Greenland and Antarctica provide a record of Earth’s climate.

Why private companies are aiming for the moon.

Where you might just see gray rocks, soil and craters on the moon, entrepreneurs see profit. And whatever happens during Thursday’s landing attempt, expect more companies to race toward the moon in the years ahead.

NASA is looking to send astronauts to the moon in the coming years, and robotic spacecraft will go there first. The space agency is financing a number of commercial missions through its Commercial Lunar Payload Services program, or CLPS. The program is modeled on NASA’s successful effort to rely on private companies for trips to and from the International Space Station.

For NASA, buying rides on private spacecraft to take instruments and equipment to the moon is cheaper than building its own vehicles. NASA also hopes to spur a new commercial industry around the moon.

So far, however, NASA has little to show for its efforts. Some of the companies that NASA had selected to bid for CLPS missions have already gone out of business. And Astrobotic of Pittsburgh’s first CLPS flight failed on its way to the moon last month.

The dream of a delivery service to the moon is not a new one.

In 2007, the X Prize Foundation announced a competition offering a $20 million grand prize to the first nongovernment-funded business or organization that could get a spacecraft to the surface of the moon and have it successfully perform a few tasks: moving 500 meters, or 1,640 feet, to a second location, and beaming data and video back to Earth.

Eleven years later, the competition ended without any of the teams even attempting a launch . Some of the X Prize teams like Astrobotic and Ispace, the parent company of the Japanese Hakuto team, continued, believing that they could develop a profitable business without the prize money.

Among other ambitious business ideas: mining the moon for helium-3 for future fusion power plants on Earth. Rare earth metals used in electronics could also potentially be extracted from lunar soil and rocks.

A layer of lunar protection that doubles as winter wear on Earth.

What does a winter coat have in common with a lunar lander?

For Columbia Sportswear, the apparel company with headquarters in Portland, Ore., the answer is that it makes a material used in both.

About a decade ago, the snow gear maker was inspired by the kinds of heat blankets that are wrapped around NASA spacecraft to reflect heat from the sun. But Columbia’s shiny gold-colored Omni-Heat lining does the opposite of the NASA protectors, reflecting body heat back to the wearer of the coat.

Intuitive Machines approached Columbia Sportswear to be a sponsor of the robotic lunar mission that is to land on the moon Thursday afternoon. In conversations, Intuitive Machines officials realized that Columbia made something they could use for their spacecraft. Like NASA, Intuitive Machines needed to make sure its spacecraft did not overheat when it was in bathed in sunlight. The Omni-Heat lining ended up wrapped around parts of the spacecraft’s exterior.

“It was more or less serendipitous,” Tim Boyle, the chief executive of Columbia Sportswear, said. “Hey, listen, we think we can help you guys with this thing.”

Columbia employees in Portland will gather to watch the landing. “We’ve got a full-size lunar lander in a conference room,” Mr. Boyle said. “We’re going to have a big party there. We’re going to be serving champagne and cake.”

Will Columbia start selling its lining to other spacecraft manufacturers too?

“This is sort of a new development in terms of how these technologies that we’ve developed could be used in other places,” Mr. Boyle said. “We’re pretty much an apparel company.”

But, he added: “Maybe. I don’t know.”

Zachary Small

Zachary Small

It’s not all rocket science: Jeff Koons packed sculptures aboard Odysseus.

The American artist Jeff Koons watched as a SpaceX rocket carrying 125 of his miniature moon sculptures and other cargo departed from the Kennedy Space Center in Florida last week.

“I grew up listening to President Kennedy speak about going to the moon,” Koons said in an interview before takeoff. “It gave our society a vision and drive that we could believe in ourselves and accomplish things.”

The artist said the project was inspired by his son Sean Koons, who approached him with the idea after seeing a proposal to send artworks to the moon. The project involved the digital arts and technology company NFMoon and the space exploration company 4Space, as well as support from Pace Gallery.

The moons are named after inspiring historical figures. “Leonardo da Vinci, Ada Lovelace, Plato, Billie Holiday,” Koons said, as he listed examples.

This is the cargo being carried by the Odysseus moon lander.

The Odysseus spacecraft is hexagonal in shape with six landing legs, standing about 14 feet tall and five feet wide. For fans of “Dr. Who,” the science fiction television show, the body of the lander is roughly the size of the Tardis, the time-traveling spacecraft that, on the outside, looks like an old British police telephone booth.

NASA is the main customer for the Intuitive Machines flight, paying the company $118 million to deliver six instruments to the lunar surface. They are:

A laser retroreflector array to bounce back laser beams fired from lunar orbit. That will act as a precise location marker for Odysseus. During the Apollo missions, astronauts left similar retroreflectors on the moon.

A LIDAR instrument will precisely measure the spacecraft’s altitude and velocity as it descends to the surface. LIDAR is similar to radar, except that it uses laser light instead of radio waves.

A stereo camera will capture video of the plume of dust kicked up by the lander’s engines during landing.

A low-frequency radio receiver will measure the effects of charged particles near the lunar surface on radio signals. That will provide information that could aid the design of future radio observatories on the lunar surface.

The Lunar Node-1 navigation beacon seeks to demonstrate an autonomous navigation system.

The lander’s propellant tank includes a NASA instrument that uses radio waves to measure how much propellant remains in the tank.

The lander is also carrying a few other payloads, including a camera built by students at Embry-Riddle Aeronautical University in Daytona Beach, Fla.; a precursor instrument for a future moon telescope; and an art project by Jeff Koons .

A U.S.-built spacecraft lands on the moon for the first time in half a century.

For the first time in more than 50 years, an American spacecraft has landed on the moon.

The lander, named Odysseus, was built by Intuitive Machines of Houston. At 6:23 p.m. Eastern time the spacecraft touched the ground, making it the first privately built spacecraft to land on the lunar surface.

At first, Tim Crain, the mission director and Intuitive Machines’ chief technology officer, said it was uncertain if the spacecraft would be able to achieve its objectives, even though the spacecraft was on the moon and transmitting signals to Earth.

Still, in the face of that indeterminate outcome, Dr. Crain congratulated his colleagues in the flight control center at the company’s headquarters.

“Houston, Odysseus has found its new home,” Dr. Crain said.

The landing site was a flat area near the Malapert A crater, about 185 miles north of the moon’s south pole. The moon’s polar regions have attracted much interest in recent years because of water ice hidden in the shadows of craters there.

Odysseus left Earth early on Feb. 15 aboard a SpaceX rocket. It pulled into lunar orbit on Wednesday. About 12 minutes before landing on Thursday, it fired its engine to begin its descent to the surface.

From this point onward in the landing sequence, Odysseus was operating completely on its own, with flight controllers at Intuitive Machines’ control center powerless to change what happened.

To accomplish the landing, Intuitive Machines had to overcome late technical issues with the flight. During the coverage of the landing, a company spokesman said a laser instrument on the spacecraft that was to provide data on its altitude and velocity was not working.

That problem explained why the spacecraft took an extra orbit around the moon, which provided two hours for changes in the spacecraft’s software that allowed the use of an experimental NASA lidar instrument on the spacecraft instead.

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  1. Business Exit Plan & Strategy Checklist

    Business Exit Plan Strategy Component #1: Valuation Your exit strategy should begin with a valuation, or appraisal, of your company. The process of valuing your company involves three steps, the first being an assessment of the current value of your business.

  2. Exit Strategy: Definition, Types, Business Plan (+Template)

    ‍ Some of the common motives for business exit include the following: Retirement - Arguably the most common reason of all motives is retirement. Business owners will inevitably retire at some stage, and it's best that they have an exit strategy in place before doing so.

  3. How to Develop an Exit Plan for Your Business

    An exit strategy is often thought of as the way to end a business — which it can be — but in best practice, it's a plan that moves a business toward long-term goals and allows a smooth transition to a new phase, whether that involves re-imagining business direction or leadership, keeping financially sustainable or pivoting for challenges.

  4. 8 Business Exit Strategies: Which Is Best for You?

    A business exit strategy is a plan for what will happen when you want to leave your business. This strategy describes and outlines the form that the transition will take. Just like you've written a business plan to guide your business throughout its life, you should have one that guides it to a conclusion.

  5. How Do I Develop an Exit Strategy for My Business?

    Simply put, it's a plan that outlines when you plan to leave, what you'll do with your business when you go, and how you'll transition the business to the next stage. In developing an exit strategy, you'll need to understand what you want to accomplish as you exit and then explore the advantages and disadvantages of various options.

  6. Business Exit Strategy Planning: How to Prepare for an Exit

    Now that you know what creating an exit strategy involves and how exits can differ for startups versus established businesses, follow these tips when executing your plans. 1. Bring in outside expertise. You need to build your own professional team for the sales process because your buyer will almost certainly have one.

  7. How to Create an Exit Strategy Plan

    How to Create an Exit Strategy Plan From defining success to identifying key areas where you can mitigate your risks, here's how to chart your way to a successful exit. Written by Touraj Parang Published on Sep. 06, 2022 Image: Shutterstock / Built In

  8. Business Exit Strategy: Definition, Examples, Best Types

    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...

  9. How to Develop a Business Exit Strategy [+ Templates]

    An exit strategy for a business is a plan created by an investor or business owner to transfer ownership of the company or shares to another investor or company. Having an exit strategy helps you make better decisions, amplifies your ROI, makes your business attractive to investors and ensures smooth transitions.

  10. How to Plan Your Exit Strategy as a Business Owner

    An exit strategy is how entrepreneurs (founders) and investors that have invested large sums of money in startup companies transfer ownership of their business to a third party. It's how investors get a return on the money they invested in the business.

  11. Business Exit Strategy

    1. Objectives One aspect that should never be missed in a business exit strategy is the owner's individual goals. Upon exiting the business, is the owner interested in getting profits or does he also want to leave a legacy? Establishing the purpose of exiting the company helps to identify the specific objectives and activities to be prioritized. 2.

  12. The 4 Stages of a Successful Business Exit Plan

    Stage 1: Exploration In many instances, the exploratory phase was the part of the exit process that took the most amount of time. During this stage, owners considered the kind of exit they...

  13. Exit Strategy Definition for an Investment or Business

    Exit Strategy: An exit strategy is a contingency plan that is executed by an investor, trader, venture capitalist or business owner to liquidate a position in a financial asset or dispose of ...

  14. Business Exit Strategy Planning Guide

    A business exit strategy is a plan that an owner or executive creates and follows to liquidate their stake in a business, ideally at a substantial profit. A successful business exit strategy requires careful planning and should be periodically revised to best reflect the current business conditions. Types of Common Exit Strategies

  15. How to Create an Exit Strategy: Everything You Need to Know

    An exit strategy is a proactive plan to shift out of or liquidate an investment position, business transaction or venture.

  16. How to Write a Business Exit Plan

    Daniel Richards Updated on January 3, 2020 Photo: Asawin Klabma / EyeEm / Getty Images All good business planning documents have a clear business exit plan that outlines your most likely exit strategy from day one.

  17. The 4 Stages of a Successful Business Exit Plan

    During this stage, owners considered the kind of exit they wanted, building clarity about what mattered to them post-transition for the business, themselves, and their family. The process of doing this created the basis for the next stage of their journey - a clear vision for the future they could build a strategy to realize. Stage 2: Strategy

  18. 10 Reasons Why Your Exit Strategy Is as Important as Your Business Plan

    1. It will change how you guide your company's future. Outlining your exit strategy, above all else, gives you a blueprint for the future. It gives you a goal to aim for, acts as a measure of your success and crystallizes your vision for life beyond the business. It also helps you visualize your company with the next person at the helm.

  19. What is an exit strategy in business?

    Exit strategy; noun: a pre-planned means of extricating oneself from a situation that has become difficult or unpleasant in a way that limits overall losses. A business exit strategy does not have to be unpleasant, though. It can simply mean you have accomplished all you've set to do with your company and are ready to move on to the next ...

  20. What is Exit Planning, Transition & Succession Planning

    In simple terms, exit planning is a three phase process undertaken by a business owner as he considers transferring ownership to another business or individual (s). A variety of terms are used by professionals and business owners alike to describe business exit planning. They may include: transition planning, exit strategy, and succession planning.

  21. Business Exit Planning: 6 Steps for a Successful Transaction

    The 6 Steps of Business Exit Planning. 1. Strategic Planning (6-12 Months) The first and most crucial step of business exit planning is to define your goals, evaluate potential exit strategies, and prepare your business for a transition. This process can take anywhere from six to twelve months, depending on the scale of changes required.

  22. Maximizing The Value Of Your Business To Ensure A Successful Exit

    A successful business exit and succession planning requires careful consideration of your goals, an assessment of your business's current state, value protection, value maximization and strategic ...

  23. Ready to Sell Your Business? Here Are 5 Savvy Exit Strategies

    Still, a good exit strategy of a business means founders can protect their investments, cash out with a substantial profit, plan retirement, and secure a future for the company — with or without them. ... Going public is often an ideal exit strategy for late-stage companies; however, startups or small businesses might need to consider another ...

  24. Business Owner Exit Strategies: 3 Options for Business Maturity

    Exit Strategy One - Sell the Business. When exiting a business, an owner might decide to sell the company, relinquishing all ownership and control, while collecting a nice lump of retirement cash. If selling is your preferred exit strategy, be sure to start the exit plan at least five to seven years before your target retirement or sale date.

  25. ‎Always On with Duncan MacPherson: Leaving No Stone Unturned: How to

    Want to receive maximum value for the business you've worked so hard to build? The key lies in being proactive with your exit strategy. Dive into a thought-provoking conversation between Duncan MacPherson and returning guest Ted Jenkin, CEO of oXYGen Financial and president of Exit Stage Left Adviso…

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  27. Inside Project Osceola: Florida State sports' 9-figure private equity plan

    Its 2026 projections are $18.6 million — $3.2 million more than the "Base Case" — in part because of "post-ACC-exit ticket prices in-line with peers."

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