Planning the perfect exit strategy

4th May 2018 Business advice, Tax CHW Accounting

If you own a business, or you have shares in someone else’s business, you should have considered how and when you’ll sell up and move on to your next project. The exit strategy process can take various forms, and it can be difficult to figure out which option is correct for you. Nicola Roby at CHW Small Business Accountants in Bolton explains some of the exit strategies available.

An exit strategy is a plan to sell ownership in your business to other investors, another company or relevant stakeholders. This applies if you are the owner of a business, or you simply own a number of shares in a company following investment. The main idea of exiting a business is usually to make money, but there are a range of other benefits too, for example to provide you with enough time to pursue other projects or allowing you to get rid of a conflict of interest with another investment.

Types of exit strategies

There are a whole range of different potential business exit strategy templates, and the most suitable option will depend on the business, your involvement, or the unique circumstances you face. Nicola details some of the exit strategies here.

Start-ups

If you’ve experienced considerable success with your start-up, you may wish to consider an exit strategy which maximises the valuation. You could approach competitors who may wish to acquire your business, technology or customers, or alternatively, any current investors in your company may want to buy you out. If you are seeking to exit due to financial difficulties, liquidation could be your best option to settle debts and maximise the value of assets.

Small businesses

As a small business owner, there are a number of exit options available. You could sell your business on the open market, for which you’ll have to determine the value of your business with the help of your accountant. You may also have the option to sell to the managers or employees of your business if they’re willing to take on the running responsibilities of the business.

Alternatively you may have competitors who wish to acquire your business and are eager to take on your customer base.

Family businesses

For family businesses, succession planning is paramount to ensure effective management as older members of the family exit the business. A major benefit of succession planning is that the business stays in the family, which can help to make sure the key values of the company are retained, and that customers retain their relationship with the business. You could sell your shares in your business to relatives, or pass these on by restructuring.

Investors’ options

If you have invested in a small business and, as a result, own a number of shares, you may want to sell these for a profit that reflects the business’ growth. You may be able to sell your shares back to the owner of the company, which will allow them to retain a greater percentage of their business, or you may wish to sell on to other investors who are able to support the business going forward.

Other options

These exit strategies are certainly not an exhaustive list. From liquidation to IPOs, there are many other tax efficient exit strategies.

How to create a business exit strategy

Choosing and implementing an exit strategy can be complex and time consuming and it’s always important to get professional advice before making any decisions, to ensure you’re acting in accordance with laws and legislation, paying the correct amount of tax, and maximising your profits.

For further advice, contact our experienced team here at CHW Small Business Accountants on 01204 534031 or via our contact us page.

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