You may have just started up your business, or you are still in the middle of running a successful business, and exiting is a long way in the future.
Planning your future exit from your business is key so you can ensure you are taking the right steps early on to achieve your goal. Starting with your end goal in mind will allow you to choose the means by which you leave your business and you can also groom your business for your desired exit.
There are several options to exit your business, including:
- Selling the business.
- Negotiating a management takeover.
- Leaving it to a family member.
- Winding the business down.
Any business plans you produce should include details on your planned exit as these will focus the direction of the business. The first decision to make is to decide what you would like to achieve from your exit. Would you like to pass your business onto a family member or are you looking to make as much money as possible for your retirement.
Preparing to sell
Selling your business is a good option if you are looking to fund your retirement or invest in a new venture. Deciding exactly which part of your busines is for sale is important, for example the shares or the trade and assets.
Working closely with your accountant, you can maximise the value of your business. Any issues can be identified before they are picked up by due diligence.
An MBO (management buyout) is a fairly common process whereby the business is purchased by the existing management team. In an MBI (management buy in) a new external team will come in and acquire the business, whilst a BIMBO (buy in management buyout) the business is bought by a combination of the two.
As the team usually already knows the business an MBO is usually the quickest and most straight forward route to exit the business, however an MBI or BIMBO could cause some internal issues.
Passing to a family member
Many family businesses pass ownership over to their children or another family member, however you should ensure that this is the correct route for your business and that they are ready for the challenge.
This can be a complex process, a transitional process for a period of time will ensure success. Ensuring your accountant is fully involved in the process can protect the value of your business.
The last option is to wind the business down or an MVL (Members Voluntary Liquidation). If there is no obvious buyer for the business, or if the business has experienced losses, the best option may be to close the business and return capital to the shareholder before it becomes insolvent.
In order to ensure all business liabilities are dealt with efficiently an accountant will need to review the situation in the first instance. The key to exiting a business successfully is planning ahead and involving your accountant early on.
If you need any help or support with planning to exit your business, please get in touch with the Clear Vision Financial Management team, call us on 01794 330025 or email us.