An exit plan is simply a plan for the business owner to retire from the daily affairs of running a business. Every business should have a 5 year exit plan because a business owner never know which life events will shorten the time spent in the business. For example, a business owner could face an illness, divorce, extreme stress, etc. Besides, as a business owner, you never know when a good offer to buy will come along.

An exit plan does not mean the business owner has to sell the business. It only means the business owner does not have to be involved in the day to day operations. Below are three ways a business owner could exit his or her business:

Hiring a c-level executive

This strategy is best for the business owner who wants to step back from the daily affairs but still wants to be somewhat involved in the business. As the owner of the business, you become part of the board of directors. Your CEO remains accountable to you as the chair of the board. Periodic meetings are held to discuss the progress of the business as well as future strategies.

Pass the business down to your children

Statistics have shown that passing down a business is more often than not unsuccessful. This means that entrepreneurs who wish to exit by passing the business down should start prepping their children early. Don’t assume that your children will just come in and know what to do: They will need to be trained.

Sell your business

If you are done with your business, the best way to exit is to sell. To maximize the cash you get from the sale, you need to plan for the exit in advance.

Having an exit plan allows a business to survive independently of the business owner. Also, it allows the business owner to consider his or her financial freedom goals and how the business can be used to attain these goals.

Do you have a 5 year exit plan? If you were to live your business now, will it fall apart? Take this assessment to see how valuable your business really is.