Different business exit strategies also offer business owners different levels of liquidity.
Selling ownership through a strategic acquisition, for example, can offer the greatest amount of liquidity in the shortest time frame, depending on how the acquisition is structured.
The appeal of an exit strategy will depend on market conditions, as well; for example, an IPO may not be the best exit strategy during a recession, and a management buyout may not be attractive to a buyer when interest rates are high.
When Are Exit Strategies Used? An exit plan may be used to:
Close a non-profitable business
Execute an investment or business venture when profit objectives are met
Close a business in the event of a significant change in market conditions
Sell an investment or a company
Importance of an Exit Plan: It may seem counter-intuitive for a business owner to develop exit strategies.