As many as half of European entrepreneurs considered a business exit in the past 12 months. At the same time, in the UK, 48% of business owners say they do not have a clear business exit strategy in place, with 13% admitting they haven’t even thought they need one.
But planning how to leave a business is actually just as important as starting one. A clear exit strategy helps business owners protect their investment and prepare for the future — whether they’re retiring, moving on to a new project, or responding to a major life change. Without a proper plan, exits can be rushed and financially damaging.
Good news, business owners have several exit options to choose from, depending on their goals, business structure, and market conditions.
This article walks you through the most common exit strategies, potential risks, and key steps to follow when planning an exit.
What is an exit strategy in business?
An exit strategy is a plan for how a business owner will leave or step back from their company. It explains what will happen to the business in the future — whether it’s sold, passed on to someone else, merged, or closed down in an organised way.
An exit strategy usually serves one of two main business goals:
- Maximising value
If the business is successful, the strategy helps the owner sell or step away in a way that brings the highest possible profit. - Limiting losses
If the business is struggling, a clear exit plan can reduce financial damage and allow for a more controlled shutdown or transition.
In both cases, the exit strategy gives the business owner a structured way to move on.
The main benefits of a right business exit strategy are:
- Financial security
A good exit strategy helps the owner get the most value out of the business when leaving. - Succession planning
It makes it easier to hand over the business to a new leader, whether a family member, employee, or buyer. - Smoother transitions
With a unique business exit strategy in place, the shift is less stressful for employees, customers, and investors. - Possibility to attract external investors or buyers
Investors feel more confident when they see a well-thought-out business exit plan — they know how and when they’ll see returns.
Six main types of business exits
Now, let’s review different business exit strategies and their pros and cons. These options offer business owners different paths to exit, depending on whether the goal is to maximize value, limit losses, or ensure continuity.
Selling to a third party (individual or company)
It involves selling your business to someone outside the company — another entrepreneur or a larger company.
Many business owners choose this option when they want to walk away fully while securing a return on their investment. The buyer usually takes over the entire business, including customers, staff, and operations. The sale price depends on the business’s performance, brand, and market conditions.
Best for: Successful businesses looking to maximize profits
| Pros | Cons |
| Potential for high returns if the business is performing wellStraightforward exit with a clean break | Finding a serious buyer can take timeYou may lose control over the future of your business |
Mergers and acquisitions (M&A)
It involves combining your business with another or being acquired by a larger company. This is often part of a growth or consolidation strategy and may fall under strategic acquisitions, where larger companies absorb smaller ones to expand their reach or capabilities.
In many cases, your business continues to operate under new ownership or branding.
The exit process can be complex but offers significant financial and strategic benefits.
Best for: Successful businesses seeking strategic growth or maximum return
| Pros | Cons |
| Potential for large payouts and business growthPossibility for the team and brand to continue operating within the new organisation | Can be legally and financially complexMay involve changes to company culture, management team, or business operations |
Additional reading: Explore the selection of the eight most successful M&A deals in the UK to learn from their experience.
Family succession
This is common in the family business and involves handing the business over to a family member, often a child or relative, who continues to run it. It allows the business legacy and values to live on within the family.
This strategy requires early planning to ensure the next generation is trained and ready. Clear communication and legal structures are also essential to avoid conflict.
Best for: Stable or successful businesses focused on long-term continuity, not short-term gains
| Pros | Cons |
| Keeps ownership in the familyPreserves long-term vision and company values | Can be risky if the successor lacks skills or interestCan lead to family disputes without clear planning |
Management buyout (MBO)
In an MBO, the existing management team or employees purchase the business from the owner.
It’s a smooth transition because the new owner already understands the business and its challenges. However, this option works well only when the team is strong, motivated, and trusted.
This type of business exit strategy also often requires financing through loans or investor support.
Best for: Profitable, well-run businesses with a strong internal team that want to get maximum value while preserving the company culture
| Pros | Cons |
| Usually seamless and low-risk transitionChance to preserve company stability and existing relationships | Managers may lack funds and need outside investorsThe sale price may be lower than on the open market |
Initial public offering (IPO)
An IPO means turning your private company into a public one by offering shares on the stock market.
It’s a long and complex process, but it can lead to significant financial rewards and public recognition.
IPOs often involve strict regulations, reporting standards, and ongoing shareholder responsibilities.
Best for: High-growth businesses aiming to maximise value and expand on a large scale
| Pros | Cons |
| Can generate significant capital and boost the company’s statusOffers liquidity to founders and early investors | Time-consuming, expensive, and heavily regulated processLoss of full control due to public shareholders |
Liquidation
It involves closing the business and selling off its assets to repay debts and recover remaining value.
This is usually a last resort when the company is no longer profitable or has no future prospects. The process can be quick, but it rarely brings much financial return. It’s about minimising losses rather than making a profit.
Best for: Failing businesses with the goal of limiting losses
| Pros | Cons |
| Ensures a fast and simple exit processHelps settle outstanding financial debts | Typically results in the lowest financial returnCan damage reputation and lead to job losses |
Note: Depending on your needs, you might also consider other exit strategies like employee buy-ins or partial exits, especially if full ownership transfer isn’t the goal.
Key considerations before you exit
The business owner’s plan to exit is much more than simply finding a buyer. Most final exit strategies depend on several key factors, making early planning essential.
To ensure a successful transition, you should consider the following aspects.
Business valuation
Knowing what your business is truly worth is one of the most important steps before exiting. A proper valuation helps you set a fair price, attract buyers or investors, and avoid leaving money on the table.
Common methods include comparing similar business sales (market approach), analysing earnings and cash flow (income approach), or reviewing assets and liabilities (asset-based approach).
Timing the exit
When you leave matters almost as much as how. Good timing can help you get the best return.
Consider current market conditions, your company’s financial performance, and your own personal readiness. For instance, exiting during strong growth or when your industry is in demand often leads to better results.
Legal and tax implications
Selling a business can trigger taxes and legal issues, depending on how the deal is structured.
You may face capital gains taxes, need to transfer ownership documents, or restructure parts of the business. It’s smart to work with external legal and tax professionals to avoid surprises and keep the process smooth.
Communication strategy
How you communicate your exit can affect your reputation and the health of the business.
Be clear and honest with employees, clients, and investors. A well-planned message helps maintain trust and keeps operations stable during the transition.
Emotional factors
Letting go of a business is often emotional, especially if you’re the founder. Your identity may be closely tied to the company, and it’s normal to feel unsure or even sad.
To help you prepare mentally and emotionally for the change, try to think about your legacy and what comes next.
Additional read: Learn what a post-merger integration checklist is and why it’s essential to have one for a successful deal.
Step-by-step guide to planning a business exit
So, you’re planning an exit. Where should you start? Here are several steps to follow.
Step 1. Define your exit goals
Start by thinking about what you want from your exit. Do you want to retire, start something new, pass the business to your family, or simply cash out? Your goals will shape the entire exit strategy for the business — from timing to the type of buyer you choose — and guide the overall business direction in the final phase.
Your exit goals should also align with your long-term business plan to ensure a smooth transition.
Step 2. Get a professional valuation
Next, find out what your business is really worth. You can ask your accountant or an outside valuation expert to look at your income, assets, and other key numbers. They’ll also compare your business to similar ones on the market.
This gives you a fair price to aim for and helps buyers trust that your business is worth it.
Step 3. Assemble your exit team
It’s hard to manage everything alone, so bring in experts to help.
You’ll need a lawyer to handle contracts and legal details, and an accountant to help with your finances and taxes. If you’re selling the business, a broker or advisor can help you find a buyer and guide the deal.
Having the right people around you makes the whole process smoother and safer.
Step 4. Prepare financial and legal documents
Before you start talking to buyers or successors, make sure your documents are in order.
This includes financial reports, tax records, employee details, contracts, and anything else someone would need to understand your business. It’s a good idea to store these files in a virtual data room, which is a safe online space where you can share important documents with only the people you trust.
Step 5. Find or vet potential buyers/successors
Now it’s time to find the right person or group to take over. This could be someone from outside the company, a competitor, a family member, or a trusted manager. Make sure they have the experience, money, and motivation to keep the business going.
A good fit means a smoother handover and better chances for your business to succeed after you leave.
Step 6. Negotiate the deal
Once you find the right buyer or successor, you’ll need to agree on the details. This includes the price, how and when they’ll pay, and whether you’ll stay to help with the transition. Your lawyer and accountant will help you review everything to make sure the deal is fair and fits your goals.
Step 7. Execute the transition plan
After the deal is signed, help the new owner take over.
This might mean training them, introducing them to your team and customers, and updating business records. A clear and friendly handover helps keep everything running smoothly and shows others that the business is in good hands.
Common mistakes to avoid
Naturally, certain obstacles can arise during the exit planning process. Here are the most common mistakes:
- Not planning early enough
Many entrepreneurs wait too long to think about their exit. According to HBR, 60% of business owners claimed to be unprepared to respond when the acquisition interest appeared. And a rushed exit can lead to poor deals, lower business value, and missed opportunities. It’s better to start business exit planning early — this gives you time to prepare, fix issues, and choose the best strategy. - Underestimating tax consequences
Taxes can take a big bite out of your final payout if you’re not careful. Without careful planning, you might face unexpected tax bills after the sale. It’s important to talk to a tax advisor early to reduce this risk. - Overvaluing the business
It’s common for owners to think their business is worth more than the market will pay. This can scare off buyers and slow down the process. Involve outside experts for professional valuation — helps you set a fair price based on real data. - Ignoring internal stakeholders
Employees, managers, and even customers can feel uncertain or anxious if they’re left in the dark. Not communicating with your team early and clearly can harm morale and trust. Keeping people informed helps the business stay strong through the transition.
Final thoughts
Planning a business exit may feel overwhelming, but with the right business strategy and steps, it can lead to a smooth and successful transition.
Whether you want to retire, sell, or pass the business on, having a clear strategy protects your investment and supports everyone involved. By knowing your goals, understanding your options, and avoiding common mistakes, you can set up the best exit strategy.
Whether you are an enterprise founder or a small business owner, follow the recommendations from the article, start planning early, and be sure that you’ll leave your business on strong terms.