How do I exit my business?

If you’ve decided to wrap up your involvement in a business, you need to choose the best exit strategy to help you achieve your goals

Do you want to make as much money as possible, or are you keen to see the business progress? Do you hope to pass it on to your family, or would you not mind if it ceased to exist? Depending on your motivation, there are four basic options for exiting a business:

  • Sell the business
  • Pass it on to a family member
  • Negotiate a management takeover
  • Wind the business down

Selling the business
If your main objectives are to make a profit, retire, or invest in a new venture, selling your business may be the best idea. For most people, an exit means getting the business ready for a change in owner. By putting together a well-thought out succession-plan, it will help to increase your sale price, while making sure your business continues to do well after you’ve left.

There are nine steps to help get a succession plan in place:

  1. Pick a target buyer
  2. Decide how fast  you’ll want out
  3. Get your accounts sorted
  4. Scale back your involvement
  5. Ensure your business has efficient processes
  6. Write a ‘how to’ manual for your business
  7. Drive up the valuation of your business by playing to your strengths and fixing weaknesses
  8. Get a guideline business valuation from a professional
  9. Work on a sales pitch to capture a buyer’s excitement

Keeping it in the family
Passing on a family business can be a complex process, involving both a transfer of power and a transfer of assets. If you’re looking to extract some value from your business in the process of passing it on, our Private Client Tax advisors can advise you on the most tax-efficient ways to do this.

A management takeover
There are three common ways for the management to purchase a business. In a management buy-out (MBO), the business is bought by an existing management team. In a management buy-in (MBI), a new external team takes over, while in a ‘buy-in management buy-out’ (BIMBO), the business is bought by a combination of an existing team and an external manager.

When approaching any management takeover, it’s essential to take both independent financial advice and legal advice

Winding the business down
If there is no obvious buyer or successor in your family or management team, or if the business has suffered losses and is unlikely to return to profitability, you may decide to close the business and return capital to shareholders before it becomes insolvent.

Taxation, employees, pensions and property all need to be considered when winding a business down. To ensure all the business’s liabilities are taken care of, this should be dealt with by a professional adviser.

How can I get the best value?
Part of your exit plan should focus on how to boost the value of the business prior to exit, and how you can extract maximum value from the exit itself. Read our answer to “How do I value my business?” for more information.

How do I get started?
It’s never too early to start thinking about your succession plan. If you would like help in shaping your strategy for exiting your business, please feel free to get in touch with me.

Further Reading

You may also find the information in these articles useful for the stage of your business

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