Running a business can be extremely rewarding, but for many owners, there comes a time when they will consider selling or handing it over.
With rising interest rates and inflation, more business owners may be considering stepping down, and knowing how to leave their business in safe hands is crucial.
By creating a clear business exit strategy in advance, you can potentially increase your financial return and prepare your business to thrive under new leadership.
What is a business exit strategy?
A business exit strategy is a plan for passing on ownership and winding down your involvement in the company.
Planning can start two to five years before your exit and requires consideration of who you will sell or pass your business on to.
There are many types of business exit strategies and understanding what is best for your business is crucial.
These can include:
• Merger or Acquisition (M&A) – Selling to another business or competitor
• Management buyout (MBO) – Your management team buys the business
• Employee Ownership Trust (EOT) – A tax-free exit strategy for business owners to pass on control of the business to a trust for the benefit of all employees
• Family succession – Passing the business onto a family member
• Selling externally – Selling the business to an unrelated buyer
• Liquidation – Closing the business and selling the assets, but this may subject you to Income Tax on distributions above £25,000
How to prepare an effective exit strategy?
For business owners, putting a clear plan in place can ensure the continuation of their business and prepare employees and partners for the change in operations.
Making sure your business operations are not reliant on you and can be handed over smoothly can help increase both business value and buyer confidence.
As a business owner, identifying your ideal buyer can help you create a clear approach and better understanding of valuation and pricing.
A professional valuation can also provide clarity regarding your business’s current standing and create a plan to maximise your returns when you decide to exit.
With early planning, you can reduce risks and identify potential issues in advance to avoid any last-minute crises that stall or derail your exit.
How to financially prepare for an exit strategy?
With the approach of the Autumn Budget, many businesses will have to consider if they will remain profitable after the announcement or if the extra admin introduced by changes in tax thresholds or Companies House will make it too much trouble.
With an exit strategy taking two to five years, it can be difficult to know when the right time to leave is and understand if the market conditions are favourable for you.
With the right financial help, you can make the most out of your finances and improve your tax efficiency when selling or passing on the business.
Our team can guide you to achieving the best possible valuation and assess which exit strategy and buyer will benefit you the most.
For expert financial advice and support, contact our team today.
