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Definition

exit strategy

Contributor(s): Ivy Wigmore

An exit strategy is a planned approach to terminating a situation in a way that will maximize benefit and/or minimize damage.

The idea of having a strategic approach can be applied to exiting any type of situation but the term is most often used in a business context in reference to partnerships, investments or jobs.

Understanding the most graceful exit strategy for establishing partnerships should be part of due diligence and vetting potential suppliers and service providers. In cloud services, for example, termination or early-withdrawal fees, cancellation notification and data extraction are just a few of the factors to be considered.

An entrepreneur's plan for exiting a startup might include selling the company at a profit or running the business as long as the return on investment (ROI) is attractive and simply terminating it when that ceases to be the case. In the stock market, an exit strategy might include a stop-loss order that instigates a sale when the value of a stock drops below a specified price.

In an employment context, exit strategies are becoming increasingly important not just for corporate executives but for all employees. People change jobs much more frequently than they did in the past, whether voluntarily or involuntarily through firing, downsizing or outsourcing. An employee's exit strategy might include negotiating a severance agreement,, updating a resume, maintaining lists of potentially helpful contacts and saving enough money to cover a period of unemployment.

No matter what the context, creating an exit strategy should be an important part of any contingency plan and risk management strategy.

See also: supplier risk management

This was last updated in December 2014

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