Most entrepreneurs spend considerable time thinking about how to start and grow a business. Far fewer consider how they might eventually leave it. Yet the decisions you make when building your business could determine whether you can sell it, pass it on, continue earning from it or simply close the doors and walk away.
When you are starting a business, planning your exit might seem like a strange priority. After all, you have customers to find, products to develop, bills to pay and, hopefully, a profitable business to build. Why worry about how you might leave before you have even started?
However, as Jon and I discussed in a recent conversation, thinking about your eventual exit is not necessarily about planning to sell your business. It is about understanding what you want to achieve and making sure the business you build gives you the freedom to choose what happens next.
Jon recently spoke to a group of entrepreneurs about securing investment. Before getting into the practicalities of attracting investors, he asked them what they ultimately wanted to achieve with their businesses.
The answers were revealing. Many had only vague ambitions, often involving selling their businesses for substantial sums and enjoying a life of freedom, perhaps travelling the world or buying a yacht.
But as Jon pointed out, financial success and personal fulfilment are not necessarily the same thing.
He shared the experiences of two entrepreneurs who had sold businesses for seven- or eight-figure sums. On paper, both had achieved extraordinary success. Yet neither was particularly happy afterwards.
Their businesses had become such an important part of their identities that selling them left an unexpected gap in their lives. They had achieved their financial objectives without fully considering what would come next.
It raises an important question: What does a successful exit actually look like for you?
There is no universally correct answer. But understanding the options available can help you make better decisions, whether you are just starting out or have been running your business for years.
1. Close the Business and Walk Away
The simplest exit option is to stop trading, settle your obligations, dispose of any remaining assets and close the business.
For many self-employed professionals, consultants, tradespeople and small business owners, this may seem like the most obvious, or even the only, option.
Consider someone who leaves employment to become an independent consultant. Their primary objective might be to replace their salary, gain control over their working hours and escape the frustrations of corporate life.
They have effectively created a job for themselves, albeit one where they are their own boss.
There is nothing inherently wrong with this. A successful lifestyle business can provide an excellent income and considerable personal satisfaction.
But what happens when the owner wants to retire?
If every customer relationship depends on them personally, and all the revenue comes directly from their expertise and time, there may be very little for somebody else to buy.
During our conversation, I shared the example of one of my daughters, who runs a bar with her fiancé.
They have built a successful business with a distinctive identity. However, they have absolutely no intention of selling it.
Their personalities and values are so closely associated with the establishment that the idea of handing it over to somebody else is simply not attractive to them.
When they eventually decide to move on, their plan is to close the doors, thank their customers and announce whatever adventure comes next.
And that is perfectly fine.
As Jon observed, their approach is entirely valid because it aligns with their personal objectives.
The principal advantage of closing a business is simplicity and control. You do not need to find a buyer or negotiate a complicated transaction, although there may still be legal, financial and contractual obligations to resolve.
The disadvantage is that you might walk away from something that could have had considerable value to somebody else.
The important distinction is whether closing the business is a deliberate choice or simply the only option available.
2. Sell the Business to an Individual or Management Team
A second option is to sell your business to somebody who wants to continue operating it.
This could be another entrepreneur, an existing employee, a business partner or a management team.
For a small business owner, this can be an attractive option because it allows them to realise some of the financial value they have created while giving the business a future beyond their own involvement.
Imagine a successful local bicycle shop.
If the owner has built a loyal customer base, established relationships with suppliers, employed knowledgeable staff and developed reliable operating procedures, another entrepreneur might see an opportunity to take over an established business rather than starting from scratch.
The buyer acquires more than stock and equipment. They acquire an existing operation with customers, revenue and potentially a recognised local brand.
Selling to employees or an existing management team can be particularly appealing because those individuals already understand how the business works.
However, there are challenges.
Finding somebody with the ambition, skills and financial resources to buy the business is not always straightforward. The seller might need to accept payment over time or remain involved during a transition period.
More importantly, the business must be capable of operating without its founder.
Jon highlighted a common problem among entrepreneurs: as their businesses grow, they often make themselves increasingly indispensable.
Every important decision, customer relationship and operational challenge passes through them.
While this might initially appear to demonstrate their importance, it can seriously undermine the value of the business to a potential buyer.
If the business cannot function without you, what exactly is the buyer purchasing?
Jon also warned about the implications of earn-out arrangements, where part of the purchase price depends on achieving agreed targets after the sale.
These can leave founders effectively working for their former businesses for several years, sometimes with significant financial consequences if they decide to leave early.
Selling your business might provide financial freedom, but the terms of the sale can determine when that freedom actually begins.
3. Sell the Business to Another Company
A third exit route involves selling your business to a larger organisation, competitor or strategic investor.
This can be particularly attractive if you have developed something that another company believes will strengthen its own operations.
Perhaps you have built proprietary technology, established a valuable customer base, developed a recognised brand or created intellectual property that a larger organisation could commercialise.
Unlike an individual buyer, who may primarily be interested in the income your business generates, a strategic buyer might see additional value in combining your assets with its existing capabilities.
For example, a technology company might acquire a smaller competitor to gain access to its software, expertise or customers.
The potential advantage is a higher valuation, particularly when the buyer believes the acquisition could create substantial future value.
But this brings us to another interesting observation from Jon.
He explained that buyers are not simply interested in what a business earns today. They also want to understand how they could make it more profitable tomorrow.
A company that generates consistent profits but offers little opportunity for growth may be less attractive than one with clear potential to expand.
Equally, a business that depends entirely on its founder presents a significant risk.
This is why Jon believes entrepreneurs should think about systemising their businesses much earlier than they might otherwise consider necessary.
Documented processes, repeatable procedures, good governance, clear financial information and effective risk management all help create a business that can operate independently.
The disadvantages of selling to another company include potentially lengthy negotiations, detailed due diligence, uncertainty for employees and the possibility that the buyer will change the business significantly after acquisition.
There is also the emotional dimension.
Having spent years building something, are you genuinely comfortable handing over control to somebody who might take it in a completely different direction?
For some entrepreneurs, the answer will be yes. For others, it could be a deal-breaker.
4. Step Back but Retain Ownership
Not every exit needs to involve selling the business.
One alternative is to step away from day-to-day operations while retaining ownership and potentially continuing to receive income.
This was an option I particularly wanted to explore during our conversation because it is often overlooked by entrepreneurs who assume their only choices are to sell or close.
I shared the example of my other daughter, who has approached entrepreneurship very differently from her sister.
From the outset, she has been building a business that she intends eventually to step back from.
Her ambition is to establish a capable management team that can run the operation independently, allowing her to move into a more strategic role, perhaps as a board member, while retaining ownership.
She has made decisions about how to build and structure the business with that long-term objective in mind.
Contrast that with somebody who opens a coffee shop simply to create a job for themselves.
Initially, they might do everything, from serving customers to ordering supplies and managing the accounts.
But what if they gradually employed people to take over those responsibilities?
Their immediate profits might decrease because they now have salaries to pay. However, they could eventually own a business that generates income without requiring their constant presence.
That business could also become more attractive to a future buyer.
The advantages are considerable. You retain ownership, benefit from future growth and potentially enjoy an ongoing income while gaining more personal freedom.
You also preserve the option to sell at a later date.
However, this approach is not without challenges.
The business must generate sufficient profit to support professional management. You need capable people you can trust, effective systems and a willingness to delegate meaningful responsibility.
You also retain the risks associated with ownership.
Perhaps the greatest challenge is psychological. Entrepreneurs who have spent years making every important decision may struggle to relinquish control.
Sometimes the most difficult part of stepping away from a business is accepting that it no longer needs you.
5. Transfer the Business to Family or Successors
The fifth option is to transfer ownership to family members or other chosen successors.
For entrepreneurs who have spent decades building a business, the idea of preserving it for future generations can be particularly appealing.
Rather than selling to an external buyer, they may prefer to see their children, relatives or trusted colleagues continue what they started.
This approach can preserve the company’s identity, values, customer relationships and employment opportunities.
It can also allow for a gradual transition, with the founder progressively transferring responsibilities and ownership.
However, family succession introduces its own complications.
The next generation might not want to run the business. Even if they do, they may have different ambitions or lack the necessary experience.
There can also be difficult questions around ownership, fairness between family members, valuation and the financial needs of the retiring founder.
A business that provides an excellent living for one generation may not necessarily support several family members in the next.
Successful succession therefore requires much more than simply identifying somebody who might take over.
It requires careful planning, clear communication and a realistic assessment of whether the business can continue to thrive under new leadership.
Once again, the founder’s ability to make themselves less central to daily operations becomes critical.
If every important decision still depends on the person supposedly retiring, has succession really taken place?
What Makes a Business Valuable to Somebody Else?
Although these five exit routes are different, our conversation repeatedly returned to one underlying question.
Are you building yourself a job, or are you building an asset?
The two are not mutually exclusive, but the distinction matters.
A business becomes more transferable when its value exists independently of its founder.
That value might come from recurring customer revenue, established processes, trained employees, intellectual property, recognised brands or assets that somebody else can use to generate income.
During our discussion, I shared a personal experience that fundamentally changed how I thought about my own business.
As an independent innovation consultant, much of my work revolves around delivering workshops, facilitating discussions and sharing my expertise.
For years, I assumed that when I eventually retired, I would simply stop providing those services.
But shortly before the COVID pandemic, I collaborated with another professional on a workshop.
Afterwards, he approached me with an unexpected proposition.
When I eventually decided to retire, he wanted to buy the intellectual property I had developed for my workshops. Alternatively, he suggested licensing it from me, potentially creating an ongoing income stream.
Until that moment, I had never seriously considered this possibility.
Over the years, I had developed proprietary methodologies, workshop materials, processes and other intellectual property. Some were protected through registered rights, while others were original materials and know-how.
I had created and protected these assets primarily to support my own work, without fully appreciating that they might also have commercial value to somebody else.
That conversation changed my perspective.
Even though my consulting business is closely associated with me personally, I may have something valuable that could be sold or licensed independently of my continued involvement.
This is an important lesson for anyone whose business revolves around their individual skills.
You might not have a company that somebody wants to acquire in its entirety, but you could still have valuable assets that others would be willing to purchase.
The challenge is recognising, developing and protecting that value before you decide to leave.
Know Your Number: What Is Your Business Actually Worth?
Jon ended our discussion with a practical piece of advice that applies whether you intend to sell your business next year or in twenty years.
Understand what your business is worth.
He compared it to owning an investment property.
Most property owners have a reasonable understanding of the value of their assets. They follow market conditions, consider comparable properties and understand the income their investments generate.
Yet many entrepreneurs have little idea what their businesses might be worth to somebody else.
This becomes particularly problematic when an unexpected buyer approaches them.
Without a clear understanding of the assets being sold and their potential value, the owner may find themselves negotiating from a position of weakness.
Jon suggested that entrepreneurs should understand which elements of their businesses they would be willing to sell, which they would prefer to retain and the approximate value of those assets.
This does not mean you need to commission an expensive formal valuation every year.
But you should understand the factors that influence value in your particular industry, including profitability, growth potential, recurring revenue, customer concentration and dependency on the founder.
Professional advice can also help you see opportunities and risks that might otherwise be overlooked.
As I summarised towards the end of our conversation: Know your number.
Conclusion: Build Your Business With the End in Mind
Perhaps the most important lesson from our discussion is that there is no single definition of a successful exit.
For one entrepreneur, success might mean selling a business for millions and moving on to a new venture.
For another, it could mean passing the business to their children.
Some might prefer to retain ownership and receive income without being involved in daily operations.
Others may be perfectly happy to close the doors after enjoying years of profitable self-employment.
All are legitimate outcomes, provided they reflect what the entrepreneur actually wants.
The mistake is not choosing one exit route over another. It is failing to consider the possibilities until circumstances force you to make a decision.
You do not need to know exactly when you will retire, who might buy your business or what it could eventually be worth.
But you should understand how the decisions you make today might affect your choices tomorrow.
Are you building a business that depends entirely on your personal involvement? Could somebody else operate it? Are you developing assets, processes or intellectual property that have value beyond your own time and expertise?
And perhaps most importantly, what would you actually want your life to look like after leaving?
An exit is not something you should only think about when you want to leave. The way you build your business determines which exits will eventually be available to you.
The earlier you start thinking about those possibilities, the more freedom you may have to choose your own future.
If you prefer to listen to the discussion in full, you can find it here:
