Knowledge Hub
for Growth

Business Exit Strategy: Types of exit strategies for SMEs

For any small business owner, a well thought through early business exit strategy means that you are prepared and have planned to sell your business or your share of a business at a time that is right for both you and that business. In this article, we cover the most common business exit strategies together with the pros and cons of each.

What is an exit strategy in business?

An exit strategy in business is a plan to bring your involvement in a business to a close. Often this means preparing the business for sale and a change of owner.

A well-considered exit strategy can increase your business sale price, whilst ensuring the business continues to thrive under new ownership.

What are the different types of business exit strategies available?

There are several common exit strategies for business. The one you choose will depend on your financial, personal and business goals.

Merger and acquisition exit strategy

An M&A exit strategy means that you prepare your business for sale to a third party company, often a competitor, which may wish to acquire your company for a variety of reasons including increasing their market share, diversifying or to acquire your talent, supply chain or product.

Through an M&A process, you may be able to maintain control of price negotiations and other terms and can potentially run an auction process, attracting multiple bidders. On the downside, such a process can be expensive and time consuming and is not guaranteed to be successful. Equally, competitors will not necessarily be vested in continuing your business as you would have done, which may lead to downsizing, redundancies of people and product and ultimate closure.

Selling to a partner or investor

Where there are two or more business owners, you can sell your share in the business to a partner or fellow investor, often someone you know and trust.

In this business exit strategy, the business will typically continue to operate as normal with minimal disruption and often under the ownership of a person who is already vested in its success. On the downside, persuading another business owner to acquire your share can be difficult and, as these buyers are ‘friendly buyers’, then it can also be difficult to drive a bargain that is most beneficial to you.

Family succession

The family succession or legacy exit means keeping a business, typically but not always profitable, ‘in the family’ so that you pass your share of the business to a family member on retirement or as part of your estate when you die.

This business exit strategy can ensure that whilst the business continues to be run by someone who understands it and has potentially anticipated running it for many years, you can remain involved.

On the downside, not every family member wishes to be involved in a family business nor has the skill set to take it forward profitably.


This is a business exit strategy where your company or business is bought solely to acquire your employees.

This type of acquisition often mean that you are able to negotiate a more favourable price and terms, whilst also being reassured that your employees will be highly valued and retained. Negatively, this is not a common form of business exit strategy with buyers hard to find and, as with M&A deals, it can be time consuming and expensive.

Management and employee buyouts (MBOs)

In MBOs, your company or business management team or a group of employees buy you out of all or your share of the business.

This exit strategy should ensure that the business transitions easily and remains in competent hands. On the downside, your management team may not wish to step up their involvement in the business and may not have the skills to ensure continued profitability.

Initial Public Offering (IPO)

In an IPO, you are taking your business to the public and selling shares to investors who become shareholders in your company. Whilst an IPO has the potential to be extremely lucrative, it is also extremely challenging in terms of the process involved. Once listed, regulatory costs are high and there is added pressure and scrutiny from shareholders and the public.


This is a common business exit strategy for failing businesses. Liquidation is one of the most final exit strategies, whereby the business is closed down and all assets sold off. Any cash earned must go toward paying off creditors and shareholders. This often delivers a quick end to a business though it is unlikely to deliver high value and can lead to breakdown in your various business relationships.


Filing for bankruptcy will result in your business assets being seized, but it will also relieve you of financial debts. On an on-going basis, your access to credit will be impacted together, potentially, with your ability to hold formal management roles in another company.

What are the main factors for SME owners to consider?

There are several factors for small business owner to consider when contemplating an exit strategy for their business. Chief amongst these are business valuation and tax implications, which focus on the history and future prospects of your business, cash flow, turnover, efficiency and profitability. Closely linked is timing, namely timing your business exit so that you have time to increase its profitability and therefore its sale price whilst taking account of any tax that may become payable.

Getting the best value for your business involves early planning of your business exit strategy so that you can exit at the point where you achieve best value, taking expert advice at an early stage and deciding between which business exit strategy may suit you best, recognising that there may be more than one.

Finally, many business owners closely identify with their business or company and therefore any business exit strategy has to consider their business legacy and reputation.

How does succession planning work,and what are its benefits?

The term succession planning is a process companies use to pass leadership roles down to another employee or group of employees. Succession planning ensures that businesses continue to run smoothly and without interruption, after important people leave the company. Succession planning is an important part of any business exit strategy to ensure that the business is not only attractive to potential new owners but also that any ownership transition is as smooth as possible.

How do I get started in choosing the right business exit strategy?

Choosing the right business exit strategy, especially as a relatively new business owner or at an early stage of the business, can seem like a daunting task. However, with expert input, it will become apparent which methods are the most appropriate for your business. For more answers to commonly asked questions and advice on company acquisitions, consult our M&A solicitors. Get in touch on 0800 689 1700, email us at, or fill out the short form below with your enquiry. 

About our expert

Adam Kudryl

Adam Kudryl

Chief Legal Officer & Head of Corporate
Having qualified as a solicitor in 2003, Adam has over 20 years' experience in advising businesses on their growth and exit strategies. Adam joined Harper James as a Partner in 2018 and became Head of Corporate in 2022. As of April 2024, Adam’s new role is Chief Legal Officer & Head of Corporate. In this role, he is responsible for the legal services aspects of Harper James and for defining the firm’s strategic vision and objectives to achieve our long-term goals, together with our CEO, Toby Harper, and the other senior leaders.

What next?

Please leave us your details and we’ll contact you to discuss your situation and legal requirements. There’s no charge for your initial consultation, and no-obligation to instruct us. We aim to respond to all messages received within 24 hours.

Your data will only be used by Harper James Solicitors. We will never sell your data and promise to keep it secure. You can find further information in our Privacy Policy.

Our offices

A national law firm

A national law firm

Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.

We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.

Head Office

Floor 5, Cavendish House, 39-41 Waterloo Street, Birmingham, B2 5PP
Regional Spaces

Stirling House, Cambridge Innovation Park, Denny End Road, Waterbeach, Cambridge, CB25 9QE
13th Floor, Piccadilly Plaza, Manchester, M1 4BT
10 Fitzroy Square, London, W1T 5HP
Harwell Innovation Centre, 173 Curie Avenue, Harwell, Oxfordshire, OX11 0QG
1st Floor, Dearing House, 1 Young St, Sheffield, S1 4UP
White Building Studios, 1-4 Cumberland Place, Southampton, SO15 2NP
A national law firm

Like what you’re reading?

Get new articles delivered to your inbox

Join 8,153 entrepreneurs reading our latest news, guides and insights.


To access legal support from just £145 per hour arrange your no-obligation initial consultation to discuss your business requirements.

Make an enquiry