Developing a business exit strategy: types and top tips

If you’re thinking of moving on from your business - or are considering the next stage of development for the company - then you’ll need to create a business exit strategy.

Every UK business should have this kind of plan in place, whether a startup looking to go public or an established business where the owner will soon retire. But how do you develop a business exit strategy?

We’ll cover everything you need to know here in this comprehensive guide. This includes types of exit strategy, why it's crucial to have one and key considerations as you draw up your own business exit plan.

Let’s start with the basics - what an exit strategy actually is.

What is a business exit strategy?

A business exit strategy is a plan for how a founder, owner or investor will sell their stake in a company. The aim is to ensure a smooth and profitable transition out of the business.

The end result may be a sale to another business, an initial public offering (IPO), a management buyout or even the winding up of the company.

There are many reasons why an exit strategy may be needed, including:

• Planning for retirement - this is also known as family succession planning, but essentially amounts to the same thing as exit planning.
• Change of leadership or restructuring
• Mergers or acquisitions (M&As), or selling business
• Going public (IPO)
• Employee or management buyout
• Founders looking for new opportunities - this may be a new venture or relocation to a market overseas. Company owners may also want to exit the business once a certain target has been met, such as profit objective or growth goal.
• Unexpected personal circumstances such as burnout, ill health or family issues.
• Liquidation - this is common for non-performing investments or companies.

Why every business needs an exit plan

Having a formal exit plan in place ensures that you get maximum value for the business when it’s time to move on, as well as minimising disruption. Even if you’re not ready to sell yet, it’s still a smart move to have an exit plan in place - or at least the outline of one.

A solid exit plan can offer all kinds of benefits, including increasing the value of the business and helping to attract investors. It can reduce tax burdens later on, as it helps you time the exit to minimise tax and get the best possible value for the company. Exit planning can also protect staff and customers, safeguarding their future with the company or giving them ample time to find other opportunities.

And perhaps most importantly, an exit strategy can help to prevent a forced emergency exit. This may happen in case of a major shift in the market, economic downturn or illness among key personnel. Without a plan, the future of the business could be in jeopardy - and what happens next could be utter chaos.

Types of business exit strategy

There are a few different types of exit strategy. Some are tied to the circumstances, such as the business owner retiring or the company failing and needing to be wound up.

Others are options a founder, owner or investor can consider as the next strategic move for themselves or the business. For example, a merger or acquisition, going public (IPO) or a management or employee buyout (MEBO).

We’ll take a look at all of these different options below.

1: Merger or acquisition deals

A merger with or sale to another company is a strong strategic exit strategy. It’s a good option for a company looking for significant growth, or an owner looking for a payout so they can move onto a new venture.

In some cases though, the owner is able to retain a role in the business following the merger or acquisition. A sale also means a clear exit date to work towards, offering lots of time to plan and prepare.

If you’re considering this option, one of the most important things you need to do is get the company externally valued - right at the very start, before any merger or acquisition discussions begin.

Pros:

• Clear exit date, allowing for an organised due diligence process
• Option for owner to remain in the business or leave the company with a profit
• Opportunity for the company to grow, increase market share, acquire new technology, reduce competition or enter new markets.

Cons:

• Mergers and acquisition processes can be time-consuming, so may not be ideal for owners looking for a quick exit
• Deals often fail.

2: Selling your stake to an investor

Another way to exit a business is simply to sell your stake to an investor or partner - often known as a ‘friendly buyer’. The business can carry on as usual, while the owner can exit with a payout.

Pros:

• Minimal disruption to operations, revenue or staff
• Buyers often have a vested interest in the company, helping to ensure the future of the business
• Quicker sales process, including a shorter period required for due diligence - this can also make the sale cheaper.

Cons:

• Not an option if a ‘friendly buyer’ isn’t available - so not suitable for all businesses
• The company may sell for a lower ‘mates rates’ price.

💡 Read more about selling your business in the UK

3: Family succession

Also known as a legacy exit, family succession is used when an owner is retiring - or is planning for the future when they may retire. If the owner wants to pass down the business to their children or another family member, they’ll need to put a family succession plan in place.

Pros:

• Ensures the future and legacy of the business within the family
• Provides time to prepare the new owner with the skills and experience to lead the company
• A smooth exit process, especially if the new owner has a close connection to daily business operations (i.e. if they already work there).

Cons:

• A suitable candidate may not be available, so not a viable option for all businesses
• This option may not be possible if family members or other suitable candidates are not passionate or interested in the business.

4: Management and employee buyouts (MEBO)

A management and employee buyout (MEBO) is where management and staff team up to acquire an existing company. It’s a type of corporate restructure used by owners looking to exit a business, as well as by public companies looking to go private.

Pros:

• A boost of loyalty and morale for employees, as they gain a sense of ownership over the business
• Easier handover process, as the new owners are already familiar with the business
• Management continuity helps to maintain company culture and undisrupted operations

Cons:

• Only possible as a strategy if the interests of management and employees align
• Requires careful planning and negotiation, which can be time-consuming.

💡 Everything to know about management buyouts

5: Initial Public Offering (IPO)

A popular exit strategy for scaling and successful businesses is to go public, through an initial public offering (IPO). This is where the company issues shares to a public stock exchange and thereby becomes a publicly traded entity.

An IPO launch is the end goal for many startups, as it provides access to a large pool of capital to help the business reach the next level and achieve its goals.

Pros:

• Access to a large pool of capital, especially with a high valuation
• Opportunities for business growth, research and development, debt repayment and strategic acquisitions
• Boosts the profile of the company, potentially attracting more talent, clients and customers.

Cons:

• Requires extensive due diligence and regulatory requirements - this means a great deal of time-consuming planning, preparation and organisation
• Public scrutiny means additional layers of complexity and higher transparency standards to meet
• Management may have less control once shareholders gain influence over the company.

6: Liquidation

If a company is failing or underperforming, its owners may use liquidation as an exit strategy. It’s a quick and final move, involving the closure of the business and the sale of all assets. Any funds raised will be used to pay debts and shareholders (if any).

Pros:

• Ends operations for a failing business
• Provides a very fast exit
• Funds raised from selling off assets can be used to pay off debts, which may save the reputation of the company as well as the credit score of any directors.

Cons:

• Limited or no financial returns, as funds are used to pay creditors
• Employees must seek new employment and supplier/client relationships are terminated
• It’s an irreversible process that spells the end for a business.

7: Acqui-hires

Last but not least, there is a rather unique strategy known as acqui-hires. This is where a business is bought for the main purpose of acquiring talent - rather than products, assets, technology or intellectual property.

It’s a potential option for businesses which have highly skilled workers. It can provide them with career opportunities even after the business is sold. It’s a popular exit strategy in the tech sector in particular.

Pros:

• Provides a practical exit for companies with skilled employees and unique expertise, without the need for expensive restructuring
• Provides a more certain and successful future for employees

Cons:

• Not suitable or possible for many businesses
• May not provide high financial returns compared to other exit strategies.

💡 You may also like:t acqui-hires and how they work

How long does an exit typically take?

There’s no set timeline for a business exit, as each company is different. The actual sale of a company may take anywhere between 3 to 6 months, but the planning and preparation can start up to 2 years earlier.¹

The exit strategy itself, including all of the time required for putting the plan together, should allow a timeline of at least 2-3 years.¹

This is why it's so very important to start preparation work as early as possible, even if you don’t actually plan to sell or leave the business just yet.

How to develop a business exit strategy - first steps

Now, let’s look at a basic roadmap for developing your business exit strategy:

1. Set your goals for the exit
2. Get a professional business valuation
3. Get your financial and other records in order
4. Choose the right exit type - one which aligns with your goals for the exit
5. Get financial and legal advice, make sure you understand the tax implications
6. Plan out the timeline for the exit
7. Develop a communications plan for informing employees, customers and stakeholders. The aim is to ensure a smooth transfer of knowledge, and to preserve and protect relationships wherever possible.
8. Put some contingency plan in place. These help you plan for worst case scenarios, such as a major change or setback while you’re still in the middle of your exit timeline. For example, you or another director/founder has a health or family situation to deal with, or there’s a financial downturn or major market shift. You need contingency plans to make sure your business is always ‘exit ready’. Alternatively, be ready to adjust the timeline.

Top tips and considerations for developing a business exit strategy

Here are some important things to bear in mind when starting work on your company’s exit strategy:

• Plan as early as possible - your strategy should be in place at least 2-3 years before the actual exit, and it’s also recommended to have at least the outlines of a plan even if you’re nowhere near ready to sell.
• Get an expert, third-party valuation carried out - you may even want to get more than one, as an accurate valuation is essential for a successful exit.
• Prepare a Power of Attorney - this will enable a trusted appointee to sign documents on behalf of the owner, which may be needed in some situations (such as serious illness or sudden death)
• Consider insurance - there are policies which provide the company with funds, or which enable co-shareholders to buy out the owner’s spouse or heirs, if something unexpected happens to the owner.
• Get as much expert legal, tax and exit planning advice as possible, at every stage of your preparations.

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sources used:

1. HSBC Innovation Banking - For sale: Navigating your first business exit

Sources last checked 14-Oct-2025