Why do business owners need an exit strategy?

The headline reveals a worrying statistic. However, with estimates suggesting 20% of businesses failing in year one, and 50% failing within the first five years, it’s hardly surprising to see planning an exit strategy isn’t the forefront of business owners’ minds – success itself is such a tough nut to crack.

What is an exit strategy?

An exit strategy is an entrepreneur or business owner’s plan for how they will sell their holding to other investors or another company. This could be part of the business or all of it. Either way it gives them the opportunity to raise capital for their next deal or to support them through the next phase of their life.

Exit strategies can be complex and it’s worth thinking about:

• How much is the business valued at?
• How long will it take to sell?
• What are the tax implications?
• Do you have the right people, skills and expertise within the business to step down?

To answer these types of questions can take time, so it’s important to plan ahead.

What are the challenges that face business owners right now?

Being an entrepreneur is no easy feat. They often face financial pressures and a lack of resource – especially in the early days – so positive cash flow is always the main priority. Without it, you don’t have a business. 

In recent years, business owners have been faced with a growing list of challenges – from rising interest rates and inflation, to a change in government, national insurance hikes, and tariff turbulence. These pressures have created a climate of uncertainty, leading to UK companies putting plans for a business exit or succession planning on hold.

That said, research from our latest report – Exits in the UK – Selling Up, Not Out – revealed early signs that things are starting to gain momentum. In the first three months of 2025 alone, three IPOs raised more than the total market capitalisation of all listings in 2022, 2023, or 2024. Interest rates have begun to stabilise, and the return of cash reserves into the M&A market is creating new opportunities for both strategic and financial buyers. Though hurdles persist, the UK exit landscape appears to be stabilising, with a shift toward more consistent and diversified results.

Why having exit strategy is important

1. You could lose out on business opportunities

At some point, it’s natural as an entrepreneur to start thinking about the next opportunity. But without releasing the capital within your current business(es), you could find yourself losing out on opportunities or resorting to short-term funding. For business owners who might be hoping to extract equity to fund an early retirement, a lack of planning could leave you tied to a business for longer than you’d hoped for.

2. You need to feel the business will be well looked after

Succession planning can be particularly important for small family-owned businesses, like independent restaurants, coffee shops and farms. Many of these proud business owners intend to pass on their enterprise over to the children. However, the children could have different career aspirations, so might not want to take over the day-to-day running of the business.

3. You might finding yourself leaving it until it’s too late

As we approach the greatest wealth transfers in history – where baby-boomers look to pass on their assets – it’s essential for business owners to prioritise getting their ducks in a row. There are roughly 750,000 UK companies where 50% of the company’s directors are over 60-years old. Many won’t yet have an exit strategy or succession plan in place.

Download our latest report on Exits in the UK

Our latest report as part of the Fortune Favours series focuses on Business Exits in the UK.

This report explores the landscape for business exits, investigates the trends affecting IPOs and M&A activity, along with a summary of recent innovations that could bring new liquidity to the private company market.

Whether you are preparing for an exit, investing in the next wave of innovation, or simply seeking to understand the market, we hope you find this report useful.

Working with Charles Stanley

Exiting a business in today’s dynamic market is far from a simple milestone—it’s a strategic process that demands foresight and careful planning. Engaging with a trusted adviser early in your entrepreneurial journey gives you the time and insight needed to structure your exit in a tax-efficient way, helping you preserve the value of everything you’ve built. It also brings clarity, structure, and confidence to each decision, empowering you to move forward with certainty and peace of mind.