There comes a time in every business owner’s life when they have to consider stepping away, be it due to poor health, retirement age, or just wanting a change in direction. You may need one of several business exit strategies for a myriad of reasons.
Even if you aren’t planning on leaving in the near future, you’ll need a solid strategy to help you transition smoothly from a business owner to a free entity.
But what are the best business exit strategies?
The importance of being earnest
Business exit strategies are essential. There are no two ways about it. If you don’t properly plan, you could find yourself in a state of retirement limbo.
You’ll be waiting to leave but, because the business isn’t ready for your departure, you may be there longer trying to organise the finer details.
It’s also essential to plan your succession well in advance. That way, you can create plans within plans that ensure a smooth transition even if something unexpected should occur.
If you plan to pass the torch to an employee/family member, you’ll need to prime them. If you want to sell, you’ll have to value the business. There are many areas to cover.
There are four main ways you can exit your business:
- sell it
- pass it on to a family member
- negotiate a management takeover
- wind the business down.
Selling your business
It’s not unusual for a business owner to sell up and move on. If you want to make a profit and enter an easy retirement, selling could be the answer. The process, though, requires much more legwork than simply putting the business on the market.
You’ll have to have a proper evaluation, whether that’s of the business’s shares, its assets or its trade — it’s the only way to ensure you’re getting a fair deal from the sale.
After you have a fair valuation, you’ll want to then try and find the right buyer. It’s not a quick process.
Remember: any profit you make will be subject to capital gains tax. The best way to limit your tax obligations is to hire an accountant who understands your business’s value and the sale’s tax implications (like us, for example).
Keeping it in the family
If the business is your pride and joy, you may want to keep it with the family name still attached. But before you decide to pass it down, you have to assess whether there’s a suitable candidate.
In your exit strategy, you’ll identify potential successors, if they need training and how long the transition will take.
There are ways to extract some of the business’s value during the transition, such as selling assets. Again, your accountant can help you do this.
If handing the business to a family member or selling isn’t an option, you can always entrust the product of your hard work to a manager. They don’t even have to be an existing employee.
The management takeover approach could be the quickest way to exit your business, especially if the manager taking over has been working with you for a long time.
Either way, you’ll have to identify the most suitable candidate for the role, whether internal or external.
Wind things down
Even if your business is solvent, you can still wind things down if there’s no buyer lying in wait, or a suitable replacement. If you have shareholders, you can reimburse them before shutting up shop for good.
Before you do walk away, you need to ensure you meet all of your outstanding business liabilities, including:
- outstanding tax bills
- employee pay
An experienced accountant will be able to help you tie up all of the loose ends before you put your feet up.
Don’t leave on a sour note
After years of hard work, you may want to exit your business as soon as possible. Before you do, there’s a lot of planning to do. To make sure you get the desired results, you should discuss your business exit strategy with your accountant.
We work closely with business owners to efficiently plan their taxes, including exit costs. If you’re planning on moving on, get in touch.