What Is An Exit Strategy In Project Management?

 what is an exit strategy in project management?

An exit strategy is a backup plan used by an investor, trader, venture capitalist, or business owner to get rid of tangible company assets or liquidate a position in a financial asset once predetermined criteria for either have been met or exceeded.

To learn more about a project management exit plan, continue reading.

What is a Project Exit Strategy?

The exit strategy is a plan of action that outlines how an ongoing project or program will reduce its reliance on financial and human resources without sacrificing the consistency and quality of its commitment to the original goals and or objectives. An exit strategy is necessary to preserve what has already been accomplished through ongoing and previous efforts while ensuring that the unfinished or novel but essential components are realized.

What is the Goal of An Exit Strategy?

Exit strategy ensures that effects continue to have an impact after a project or program is completed. It can also be described in a more general sense as the sustainability strategy of a program.

Why Are Exit Strategies Important?

When exit strategies are prepared with partners before a program closes, better program results are guaranteed, and commitment to program sustainability is encouraged. Additionally, effective exit strategies can aid in easing any conflict that may exist between the commitment to program outcomes and the withdrawal of assistance. Exit strategies can also assist in defining and clarifying a sponsor’s role to host nations and local partners as being time-limited, thereby lowering the risk of misunderstandings and ensuing dependency.

Basic Approaches to Exit Strategies

Phasing Down

Phasing down is a method of gradually cutting back on program activities while retaining the positive effects of the program while the original sponsor (or implementing agency or donor) uses fewer resources. Often, phasing down comes before phasing over and/or phasing out.

Phasing Out

This describes a sponsor’s decision to stop supporting a program without handing it off to another organization to carry on with. When permanent or self-sustaining changes are achieved, a program should ideally be phased out, negating the need for additional external inputs. Programs can be planned from the beginning to instill knowledge, skills, and tangible assets within a set time frame, taking into account funding cycles when planning the timing of the phase-out.

Phasing over

“Phasing over” is the third kind of exit strategy approach. Here, a sponsor assigns community-based organizations or institutions to carry out program activities. In order for the services to be provided to continue through local organizations, institutional capacity building is prioritized during program design and implementation.

Key Features of Exit Strategy

· Intervention/actions/activities

· Actors (who will implement/manage what)

· Timelines (when will what be done)

· Resources needed (financial, human, material)

· Source of resources (who will provide human and financial resources)

· Monitoring and Evaluation (what and when)

· Who will monitor the activities

· Other challenges and how they can be addressed

 what is an exit strategy in project management?

Exit Strategies for a Business Venture

Entrepreneurs who are successful plan for a thorough exit strategy when starting a new business in the event that operations do not reach predetermined milestones.

The majority of VCs demand that a well-thought-out exit strategy is incorporated into a business plan before investing any money. If another party makes a lucrative offer for the company, investors or business owners may decide to leave.

The ideal exit strategy for a business is created in the initial business plan before the company is launched. Decisions about how to develop your business will be influenced by your exit strategy. Initial public offerings (IPOs), strategic purchases, and management buy-outs (MBOs) are a few examples of common exit strategies.

The exit strategy an entrepreneur selects is based on a variety of factors, including how much control or involvement they want to retain in the company, whether they want the business to be run the same way moving forward, or if they are willing to see it change. The business owner will demand a just price for their ownership stake.

When a company is strategically acquired, for instance, the founder is released from ownership obligations but also relinquishes control. IPOs are frequently regarded as the best exit strategy due to their prestige and high returns. The least preferred method of closing a business, in contrast, is bankruptcy.

Business valuation is a crucial component of an exit strategy, and there are experts who can assist business owners (and buyers) in reviewing a company’s financials to establish a fair value. Additionally, there are transition managers whose job is to help sellers with their exit plans for their companies.

Exit Strategies for a Trade

Exit strategies for both the profit and loss sides of a trade must be carefully planned and implemented when trading securities, whether for short-term investments or intraday trades. All exit trades ought to be executed right away after a position is taken. When a trade reaches its profit objective, it can either be closed out right away or a trailing stop can be used to try to increase profits.

It should never be permitted for a profitable trade to turn negative. Investors should decide in advance how much loss is acceptable and then stick to a stop-loss to protect their losses on losing trades.

Exit strategies are crucial in the context of trading because they help traders control their emotions. Many traders become greedy when a trade reaches its target price and delay closing it in an effort to increase its profit, which ultimately turns winning trades into losing trades. When losing trades hit their stop-loss levels, traders become fearful and hesitate to close them out, which results in even bigger losses.

A trade can be closed out in one of two ways: by making a profit or by suffering a loss. The type of exit being made is described by traders using the terms take-profit and stop-loss orders. Sometimes these terms are abbreviated as “T/P” and “S/L” by traders.

Stop-loss orders, also known as stops, are requests made to a broker to automatically sell shares of stock at a particular level or price. When it does, the stop-loss will instantly change into a market order to sell. In the event that the market shifts quickly against an investor, these can help minimize losses.

The Bottom Line

The sustainability of the intervention depends on a well-planned and thought-out exit strategy. Keep in mind that an exit strategy is a procedure, not a one-time thing. The main project proposal should include a plan for leaving the project. The implementation of an exit strategy should begin in the first month of a short project that lasts one year or less. For a lengthy project, say 4 or 5 years, the exit strategy should be approved within six months of the project’s beginning, and implementation should begin in the first year of the project.