finance
Exit Strategy
The plan for how the founder will eventually leave or sell the business.
Definition
Exit strategy is the plan for how the founder eventually realizes value from the business - through sale to a strategic acquirer, sale to private equity, sale to employees (ESOP), family succession, or wind-down. Different exits favor different preparation: PE wants clean financials and growth trajectory, strategics want strategic fit, employee buyouts need documented systems. The earlier you plan the exit, the more control you have over its terms. Most founders start exit planning 12-18 months before sale; the better discipline is 3-5 years before.
In your business
- →Start exit planning 3-5 years before, not 12 months before - more time = better terms
- →Different exit paths optimize for different things - know which one you're building toward
- →Reduce owner dependency before any exit - dependent businesses sell for 2-3x lower multiples