Where next for me and my business?

It’s never too early to think about your exit – 9 things you should consider to ensure you get the best outcome for you?

‘I set up my business over 20 years ago and have hugely enjoyed growing it and leading my team and it continues to do well.  However, I now want to take a step back and have more time to enjoy life with my wife.  I am aware that this kind of transition needs forethought and planning and I want to protect both the value I have created and my staff.  What are the key areas I need to think about and the questions I need to ask myself?’

It was really refreshing to receive this enquiry, not least because the client had given this a lot of thought and was ready to listen and discuss how he should prepare both his business and himself for the ultimate transition away from his leadership and most likely his ownership.  Refreshing because, too often, we find ourselves talking to business owners who are ready to exit ‘now’ and do not realise that in order to maximise the value of their investment there are a number of steps that they need to put in place to ensure the value of their lifetime’s work is protected.  Here we set out 9 key points to consider when thinking about exit.

Firstly, remember that ‘Preparation is key!’ This might include mental preparation for yourself.  Is there a risk you could outstay your welcome or hang on with reduced commitment for the sake of it as – ultimately – this could affect the value of the business

Secondly, is this just a transition for you – the CEO – or for the business? Is the business being passed down to the next generation, management or is an exit likely?

Is there an obvious successor to you and a solid management team in place? If not, should you be looking at alternatives? Even if you are looking to sell the business, any buyer will ideally want to see a management team staying with the business who are capable of taking it forward.  Some financial buyers do introduce buy in candidates but this will have an impact on the ultimate price as they will need to discount for this risk

Consider that there may be a transition period where you stay on with the business for 1 to 2 years under its new ownership. Many buyers ask for this in order to ensure that significant value doesn’t leave the business along with your departure and that you are there to ensure a smooth transition

Do you have the right second tier management team in place? If not, are there any key gaps that you need to fill?  Also, are those management incentivised to maximise the value of the business?

Educate, groom and incentivise the successors. Whilst you are there, ensure they attend key management meetings where you can share your wisdom and experience, consider where any skills are lacking and training might be needed and incentivise key employees through a management incentive scheme such as an EMI

Ensure any other shareholders are aligned as to what the next step is. Tackle any difficult conversations upfront to ensure any transition is as smooth as possible and there are no last minute shareholder disagreements

Remain vigilant to any changes happening in your marketplace. For example, if it is consolidating with many of your competitors being acquired, ensure this doesn’t weaken your market position or reduce the number of acquirers available to buy your business if an exit is the most likely route.  Consider how this might impact the timing of your exit

Ensure you are best placed to consider any tax implications and maximise all the tax relief available to you. Consider in particular entrepreneurs relief, the potential tax implications of any earn outs and deferred consideration and both inheritance tax planning and business property relief

Like any successful project and as identified in point one it is all down to planning and preparation. Talking to a specialist advisor at the outset will ensure that you have covered every option available from successor to tax planning to ensure you not only get the optimum value but with minimum disruption to you and your business.

At Wilson Partners, we have a Specialist Corporate Finance division with expert knowledge of business sales and MBOs. Our team works tirelessly to find the right suitor for our clients ensuring that we achieve maximum value and minimum stress. They will also work closely with our specialist Tax team, so that you minimise your tax exposure.

So if you’re already thinking about exit, talk to us today for an informal chat. Just call 01628 770 770.

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