A business exit strategy is an entrepreneur’s strategic plan to sell their company ownership to investors or another company. It gives an entrepreneur a way to reduce or liquidate their stake in a business and make a substantial profit if the business is booming. Ideally, exit strategies are developed before actually going into the business. You may ask why - because exit strategies are necessary to secure an entrepreneur’s financial future.

Business exit strategy offers control of the business. Although your intention may not be to sell in the near future, unexpected offers to purchase your business could change your mind. It also helps plan strategically and enables you to decide what you want to achieve from business. It allows you to choose and secure the best types of finance and demonstrate to lenders that you’re a risk worth taking. And, of course, an exit strategy is vital for retirement or potential ill-health. It allows you to move quickly in case unexpected circumstances happens. However, exit plans are not static documents; they are fluid and should be reviewed as the company evolves to ensure they remain achievable and provide security.

The following are the five types of exit plans:

1. Merger & Acquisition (M&A). This involves the process of combining two companies into one. The goal of connecting two or more businesses is to try and achieve synergy – where the whole (new company) is greater than the sum of its parts (the former two separate entities).

2. Initial Public Offering (IPO). This is the process through which a privately held company issues shares of stock to the public for the first time. Also known as “going public,” an IPO transforms a business from a privately owned and operated entity into one owned by public stockholders.

3. Sell to a friendly individual. This is not an M&A since it is not combining two entities into one. Yet it’s a great way to “cash-out” so you can pay investors, pay yourself, take some time off, and get ready to have some fun all over again. The ideal buyer has more skills and interest in the operational side of the business and can scale it.

4. Make it your cash cow. If you are in a stable, secure marketplace with a business with a steady revenue stream, pay off investors, find someone you trust to run it for you while you use the remaining cash to develop your next great idea. You retain ownership and enjoy the annuity. But cash cows seem to need constant feeding to stay healthy. That’s when the value acceleration comes into play. What would be a better investment than your investment in the company, where you can control the upside.

5. Liquidation and close. This means you’ll want to turn your remaining business assets, such as office equipment, tools, and furniture, into cash to pay your creditors—or in a best-case scenario, to put in your pocket.

These are the five exit strategies of most companies, but still, the best exit strategy for your business is the one that best fits your goals and expectations. You may want to reflect on all these before creating one that will suit your company.