How to write an exit strategy

Written by jennifer vanbaren
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How to write an exit strategy
An exit strategy is a plan designed for when it is time to close a business. (for sale sign image by jcpjr from Fotolia.com)

An exit strategy is part of a typical business plan and outlines the process a company will use when the time comes to close its doors. The most common type of exit a business plans for is the sale of the business. Growthink, a blog dedicated to business, explains that planning the sale of the business is as vital as planning how to begin and grow the business.

Skill level:
Moderate

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Instructions

  1. 1

    Create a strategy based on business and life goals. The first step in creating an exit strategy is determining what are the goals of the company. This might include creating a business plan that sets a specific time frame or a specific dollar value of the business before planning to sell. This may also include transferring business rights to a family member or third party.

  2. 2

    Determine when you will sell the business. Many companies wait, until a business is failing or has exhausted its resources, to sell. According to Growthink, the prime time to sell a business is at the peak of business. In other words, the most profitable time to sell is when the business is booming. The time of the sale of the business does not need to be set in terms of a specific date, but is often set in terms of profitability.

  3. 3

    Decide on the value. The exit strategy should specifically state how the sale or transfer of the business will take place. If it is decided that the business will be sold when it reaches a certain value, the value should be stated in the exit strategy. If the business will transfer at a certain value, that too should be stated.

  4. 4

    Study the tax consequences of the business exit. Different structures of businesses have different tax consequences. It is important to consult with a tax professional when determining this step in the exit strategy. Finding the most cost effective method of exit is beneficial to the owners.

  5. 5

    Decide if business continuation is important. Many businesses do not like the idea of selling a business that has owner's names attached. If for some reason, the new owner of the business makes poor or unethical business decisions, the reputation of the person's name could potentially suffer. When a business is purchased, many new owners will change the business' name; however many choose to keep the same name because the name is established and recognisable.

  6. 6

    Consider possible scenarios. How or if the business will continue if one owner dies or becomes ill or incapacitated must be considered. This should be discussed and included in the exit strategy that is part of the company's business plan.

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