Exiting your business
Exiting your business when you have put all of your energy into setting up and growing your business was probably far from your thoughts when you first started out. However, it is vital to think about your exit plan early on. At Clear Vision Financial Management, we have seen an increase in many business owners evaluating the future of their business more as a knock-on effect of the past few years.
The pandemic forced many business owners to evaluate their work-life balance and decide that spending time with their family was more valuable.
What do business owners need to think about whilst in the midst of running their business? The key is to have a strategy in place so you can ensure your business is working towards your end goal. There are a number of options available which include:
Liquidation
This would involve closing the business completely and selling any assets. There are two routes available depending on the time available.
Quick option
If you are looking to liquidate your business in a hurry, you can work with liquidation experts to ensure you are paying back any creditors, sorting out all legal and financial commitments, selling any assets and dealing with any employees. This will enable you to navigate a quick and simple exit however you lose out on selling other valuable items such as client lists and business information.
Long term
The other option is to continue paying yourself until your business runs out of cash and then you close the business. This will allow you the time to maximise any business assets which you can sell. It will also allow you to maintain your lifestyle for longer. However, there could be tax implications and any other investors will lose out as the business is slowly shut down.
Selling
By selling your business you can ensure the continuity and future success of your business. You may decide to sell to someone you already know or put the sale on the open market.
Selling to someone you know
There could be someone already involved in the business who would be interested in purchasing your business, this could be an employee, friend, customer or family member.
Management buy-out
There are many different forms in which the management team could buy out the business. The existing team could simply buy the business (MBO), a new external management team could buy the business and take over (MBI). There could be a combination of the two where the existing management team combine with new managers to buy the business (BIMBO).
A management buy-out can provide a quick and simple way for you to exit your business as they generally have the knowledge to continue running the business and continuing success.
Passing to family
Many business owners will look to pass their business onto their children however this can be a complex decision and you need to ensure they are fully invested in taking the business to the next level.
As part of the process, you will need to transfer both power and assets, it would be useful to have a transitional period so any issues can be resolved.
It is important to focus on the end point of your business and to have a long-term plan in place. This can be reviewed regularly and updated as your life changes. Some of the key things to think about are how long you would like to run your business, your financial situation and expectations and your plans post running your business.
If you would like to chat about the benefits of Xero, please get in touch with the friendly Clear Vision Financial Management team. You can call us on 01794 330025 or email us.
