What does the term "exit strategy" refer to in business?

The term "exit strategy" refers to a planned approach for selling or disposing of a business. It is an essential component for entrepreneurs and business owners who want to ensure they have a clear path for how they will eventually leave the business they have built, whether through selling it, passing it on, or liquidating the assets.

Having a well-defined exit strategy is crucial for several reasons. It provides business owners with a vision for the future and can influence operational decisions. It also serves as a guideline for attracting potential investors by showing them there is a clear plan for how they will realize a return on their investment.

While other strategies, such as ones focused on expansion or operational improvement, are important for the ongoing success of a business, they do not encompass the specific goal of planning for the end of ownership. Similarly, methods for raising funds, though critical for the business’s growth and sustainability, do not directly relate to exiting the business. Thus, the focus of an exit strategy is singularly on the eventual transition out of the business.