You’ve built up your business, watched it flourish and grow and now you may be considering retirement – or looking for a new project to put your energy into. Forging a successful exit from an owner-managed business requires sound planning – and there are certain things you should keep in mind. Most people will only do this once, so it is worth doing it right.
- Identify your potential buyers. These could range from your contemporaries in the market to financial investors or even employees. Employee ownership trusts, whereby employees own a share in the business, are becoming an attractive option for those looking at exit strategies. Whilst not all options may be available, every business is different – so you shouldn’t assume that the only buyer is someone like you.
- Assess your personal importance to the business. The value of many owner-managed businesses is disproportionally affected by the owner’s personal input. Buyers will often want a seller to stay on for a handover period following the sale to ensure value is not lost. Ask yourself if and for how long you would want to work for ‘your’ business when it is being run by someone else. The less the business is dependent on you, the easier it will be to sell and move on. Consider a period of transition whereby you can train someone up to learn and eventually take over your role.
- Address any issues. Buyers will be ready to identify any risks prior to taking on a business, so it’s important that you do the same. These include ensuring your statutory and financial records are in order, your tax and payroll are up to date, and that your personal and business dealings have been kept separate. You should also analyse arrangements with your suppliers and consider whether your business relies on a small number of either, as this is often a significant risk factor for potential buyers.
- Recognise the emotional aspects. Exiting a business which you’ve nurtured will in many cases be emotional. Being well-prepared and well-advised will help with coming to terms with the process.
- Be prepared for additional work. A sale process will require considerable input from you in addition to your usual role of running the business. Planning and good advice will reduce the load, but no-one knows your business as well as you do. Potential buyers will scrutinise all aspects of your business – and you are more likely than not going to be the one with the answers.
While this is by no means an exhaustive list, dealing with these issues prior to commencing an exit process will make your journey much smoother. Planning ahead is the golden rule – a well-planned exit will lead to a simpler process, is likely to maximise value and will allow you to achieve your aims and move on.