A recent survey by Capital on Tap revealed that 79 per cent of small business owners do not have an exit plan, and highlighted a range of reasons behind the lack of strategy.
Emotional attachment to the business was one of the most significant, with over a third of owners saying they could not imagine letting go, whilst others pointed to the difficulty of finding a buyer and legal complexities.
Why do I need an exit plan?
Having an exit plan in place allows you to prepare more effectively for an eventual sale, buyout or merger.
It gives you the opportunity to build value in line with your intended departure from the business so you can enjoy a better return.
On the other hand, life doesn’t always go according to plan. While you may not feel ready to step away from your business, illness, stress or sudden changes to personal circumstances can for your hand with no notice.
The irony is that by trying to retain control for too long, many owners risk losing out in the long-term, and could potentially devalue their company.
Without a considered exit strategy, you could be left with little bargaining power or, in the worst-case scenario, be forced to close.
Exit strategy – What are my options?
Preparing an exit strategy requires careful consideration of all the options available to you:
- Do you want to seek a merger and acquisition transaction with another business?
- Would an Employee Ownership Trust (EOT) appeal to you?
- Have you considered a management buy-in, or buy-out?
- Are there family members you have in mind to take over the business?
It is not safe to assume that a buyer will appear out of nowhere or that your children will want to take over one day.
You need to consider the legacy you want to leave, the financial outcome you hope to achieve and the tax implications of the different exit options.
If you are planning to sell your business, you also need to consider how you will prepare for the sale. Are your accounts in order? Do you have a strong management team in place? Are there any issues that need fixing before the business goes to market?
Taking the time to plan now can help you to achieve the best outcome and leave your business on your terms.
To talk to our team of friendly experts about your exit plans, or if you need support to identify an exit strategy, contact us today.
