The question every founder should be asking — and almost none are
Most founders think an exit strategy is something you figure out when you're ready to leave. That's backwards. Your exit strategy should inform every major decision you make from day one. Here's why — and how.
An exit strategy is a plan for how you will eventually transition ownership or control of your business — whether through a sale, merger, IPO, management buyout, or passing it to family. It defines your destination and works backwards to inform your decisions today.
But here's the thing: even if you never plan to sell, having an exit strategy makes you a better operator. It forces you to build the kind of business that could be sold — which is the same kind of business that's most valuable to own.
The most common exit paths for private businesses: strategic acquisition (selling to a larger company in your industry), financial acquisition (selling to private equity), management buyout (your team buys you out), and family succession. Each path requires different preparation.
Strategic acquisition: a larger company buys you for your market position, customer base, technology, or team. This typically commands the highest multiples but requires the most preparation. Buyers want to know that your business adds strategic value to theirs.
Financial acquisition: private equity or a family office buys you for the cash flow. They're buying a financial asset, so they'll scrutinize your EBITDA, your growth rate, and your management team's ability to operate independently.
Management buyout: your leadership team buys you out, often with financing. This is a great option if you want to preserve your culture and reward your team, but it requires that your team has the financial capacity and the capability to run the business without you.
Roll-up: your business is acquired as part of a larger consolidation strategy in your industry. Roll-ups can move fast and command good multiples if your business fits the acquirer's thesis.
Now. Regardless of where you are in your business journey, the best time to start thinking about your exit is today. Not because you're planning to leave tomorrow, but because the decisions you make today — about systems, team, financials, and culture — will determine your options and your value when the time comes.
The founders who get the best exits are the ones who've been building for it for years. They have clean books, documented systems, strong leadership teams, and predictable revenue. Those things take time to build. Start now.
At minimum, have a conversation with an M&A advisor every 12-18 months. Understand how businesses in your industry are valued. Know what buyers are looking for. And build your business accordingly.
An exit strategy isn't about leaving — it's about building maximum value into your business at every stage. Start planning now, build for transferability and predictability, and you'll have options that most founders never get.
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