Starting a business is one thing. Growing it is another. But exiting in style, with the rewards you deserve, takes long-term planning and careful thought.
It’s never too soon to think about your five or ten-year plan, succession and retirement planning.
Making your business exit plan
Making a business exit plan is often put off until the last moment, but we would advise doing so a good time in advance while allowing flexibility.
Failure to plan ahead can risk limiting your future options. We would suggest a five to ten-year plan setting out where you want your company to be by the time you leave it.
You should hope to leave your company in the strongest position possible, with a strong profile in your sector, a solid client list and consistent year-by-year profits.
As the head of the company, you need to focus on the ultimate goal of leaving it exactly how you would like – more than just the day-to-day running of the business.
Many business owners plan to coincide the business exit with their own retirement.
Others prefer their exit to be purely financial but hope to still take an active role in the company’s management. In these cases, any future purchasers must share this vision.
Other business owners prefer to retire first while retaining ownership for a time as part of a gradual exit plan. This isn’t always the best strategy as it can create friction between you and your intended successors.
When thinking of retirement, it’s also worth factoring in how you want to spend your days- a lot of former business owners can find themselves at a loose end.
Ideally, you want to plan to exit your business when it’s in as strong a position as possible. Consistent profits would be ideal. Part of your exit plan could be an up-to-date business evaluation.
This will help you gain a realistic understanding of what you might get for your company should you choose to sell it – many business owners tend to slightly overvalue their company.
Keeping your business value in mind at all times is a good way to run your company long before leaving it, but essential for knowing what to expect when you choose to leave.
What are the exit strategies to choose from?
There are a number of different alternatives you can choose from in exiting your business. Here are some of the key ways you can choose for your model:
Selling your company – a trade sale is when you sell your business to a third party, who would then take on its assets and shares.
This will be easier if you can show consistent profits, demonstrate that the company will survive your leaving, offer high quality products or services, have a loyal or expanding customer base and effective staff, managers and assets. Good accountancy advice will be a huge help here.
Passing onto family – many business owners have a succession plan involving family members, usually, though not always, their children. This allows the firm you built up to remain a family concern, part of your legacy.
If this appeals to you, we would advise involving those you plan to take over the business from as early a date as possible. Experience will be crucial in assisting a smooth transition.
It’s also essential you discuss this with the family members you have in mind, as there’s no guarantee they will want to take over a business.
It’s also worth noting that passing a company onto family members requires complex tax planning to avoid a significant burden. We would recommend you contact us for the best advice on what tax planning will work for you.
Mergers and acquisitions – this refers to a larger company purchasing yours in order to merge them together.
Ideally you may have multiple larger companies making offers for yours, increasing the sum you get from your sale.
However, the whole process can be time-consuming and expensive so we would recommend seeking advice before you make the decision.
Employee takeover – selling the business to employees can be a way of keeping it in the hands of those who know it best and helped build it up.
You may also want to sell the business to a chosen partner or investor. Both of these options require some interest on the part of those you wish to sell the business to, but on the plus side, the process for exiting can be much simpler if kept inside the company to an extent.
All of these options can work well with careful planning and a clear overview of how your business is performing.
Try to be sure exactly what you hope to get from your exit and how to go about getting it.
For all of the above, professional accountancy advice is invaluable to get your company in the position you want it to be and best plan your exit.
Contact us on 020 3440 5210 or fill out an online contact form and we’ll be happy to help.