How a business exit strategy can prepare for new leadership

For many business owners, building up their company over time is a personal achievement and it can be hard to know when to step down.

However, with interest rates rising and economic uncertainty looming, now might be the right time to consider selling or handing over your company.

By planning a clear business exit strategy, you can prepare your operations for when you leave and potentially increase your financial return.

Why is a business exit strategy important?

A business exit strategy is a plan for ownership to be handed over and involvement to be reduced over time.

There are several ways ownership can be passed on and understanding what will benefit your business is important.

These strategies can include:

• Selling to another business or competitor through a merger or acquisition
• Management buyout (MBO), where your management team buys the business
• An Employee Ownership Trust (EOT) which is a tax-free exit strategy for business owners to pass on control of the business to a trust for the benefit of all employees
• Passing the business onto a family member
• Selling the business to an external buyer
• Liquidating the business and selling the assets, however this may subject you to Income Tax on distributions above £25,000

How to prepare your business for new leadership?

Planning your exit strategy can start two to five years before you leave, so considering who you want to sell or pass your business on to is important.

If you choose to sell the business externally, identifying your buyer can help create a better plan for valuation and pricing.

However, if you are unsure of the valuation of your business, professional help can give you clarity on your finances and create a plan to maximise your returns when you decide to exit.

For business owners, a company that can operate without you is more appealing when selling and can increase both business value and buyer confidence.

Putting a clear plan in place can make sure your operations run smoothly when new leadership steps in and prepare employees and partners for the change.

When a new business owner steps in, it is important to reduce the risks and identify potential issues in advance to avoid any last-minute crises that stall or derail your exit.

Why can planning an exit strategy benefit you?

With the Autumn Budget potentially introducing changes in tax thresholds, businesses must consider whether they will remain profitable or if the additional admin will become 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 if the market conditions are favourable for you.

With the uncertainty of the Autumn Budget, business owners should regularly assess market conditions and changes in policies to know when it is most favourable for them to exit.

By planning and seeking financial help, our team can help you achieve 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.