As a business owner, you work hard, and it will soon be time to reap the rewards of your efforts, but have you planned your exit strategy? How can you build a meaningful life beyond your business and what do you need to consider? We look at the emotional side of exiting, along with the necessary financial planning steps involved.
The emotional side of exit
When you’re running a business, your focus is usually on the activities needed to keep it profitable and your operations flowing smoothly. However, when you start approaching retirement age, it’s natural to start thinking about exit planning and your personal goals.
How much time have you spent planning your own personal goals and whether your business can finance your plans? Business owners and entrepreneurs have different financial planning needs compared to employed professionals.
Most businesses have a lifecycle, so you will need to decide the future of your business. Weigh up your personal goals and the goals of the business, along with other stakeholders whose goals you must consider. Establish a date that you plan to work towards, and keep shareholders, partners, employees, and customers fully informed.
If you run a business with other shareholders or partners, have you considered what will happen when you retire? You will need to consider what happens to the shares or who you will pass the business onto, such as a family member or company manager.
If you have a family-owned business, for example, you might want to pass on your business to one child. In this instance, you will need to consider whether this will cause any issues with other family members. It’s important to detail family ownership within your estate plan.
What is your business exit strategy?
When it comes to planning your business exit strategy, you may be faced with two scenarios. In a succession plan, you would hand the reins over to the next leader, such as a fellow director or a family member. Other exit strategies could involve selling or closing the business or being bought out by another director (management buyout – MBO).
If you plan to keep your business in the family, but they don’t want to run it, then you can arrange for them to still receive an income. You will also need to consider how to keep business assets within the bloodline using an estate plan.
If you plan to close the business, then you could consider a Members’ Voluntary Liquidation (MVL). If your business is solvent, you could liquidate the assets. After all debts have been paid, any remaining business funds would be distributed to shareholders. You would need to engage a licensed Insolvency Practitioner to act as liquidator.
A management buyout (MBO) is when your company’s managers become the owners of your business. This ensures business continuity with the same team and the ability to operate and service customers. The managers would need to raise enough finances as a collective to buy the business from you.
It’s important to put in place shareholder agreements before exit strategies are agreed. This gives directors protection over who will run the business. A shareholder agreement can offer directors or partners the option to buy or sell company shares.
Do you want to sell your business?
Are you thinking of selling your business? Make sure you have clarified your reasons and you’re clear on what you want from the sale. A business sale involves a lot of preparation to ensure you achieve the right price. You will also need to engage an experienced accountant or broker to carry out a business valuation.
The timing and structure of a business sale will determine certain tax implications. You would need to consider a share sale vs an asset sale. When you sell a business, there is Business Asset Disposal Relief available. Since April 2025, this is a reduced rate of Capital Gains Tax of 14% on all gains on qualifying assets that have been disposed of (see Gov.uk).
From an estate and inheritance tax (IHT) planning perspective, you will need to consider what happens after liquidity post-sale. There are different approaches to preserving and passing on wealth to your children or grandchildren. Speak to our financial planning team.
Financial planning for life beyond business
As a business owner, you have more options for maximising the value of your pension and retirement plans than an employee. Are you taking full advantage of these and optimising your pension opportunities?
There are various methods for tax-efficient extraction of your business value prior to exiting. From pension contributions to dividends and use of certain allowances pre-exit, you could also use trusts to minimise future tax on shares.
When you’re looking to exit your business, consider how you will fund your plans. You might be ready for retirement, but your capital is tied into the business. You might not be ready to fully retire and have other revenue streams you can draw from.
Map out your lifestyle goals using cash-flow forecasting to get a view of future costs relating to travel, family support, philanthropy, and possibly new ventures. This enables you to gain clarity on your money, so you can plan ahead and enjoy your new lifestyle.
Our financial planners use a cash-flow planning tool to model certain “what if” scenarios, such as downsizing, gifting, multiple income sources, or part-time consulting. As well as forecasting your finances over your lifetime with your goals in mind, it accounts for various scenarios. These include times of high inflation, low investment returns and big life events.
Wealth Management, Nottingham
If you’re considering your options, we can advise you on management buyouts, selling your company, or how to keep your business within your family. Our team aims to help you assess where you are today and help you plan for where you want your business to be.
At Balance Wealth Planning, our experienced financial planners have the expertise to advise you on strategic exit and post-exit life planning. We offer comprehensive financial planning advice for business owners and entrepreneurs. Our clients have businesses across almost every industry and each individual has their own set of circumstances.
For more information, please download ‘A Guide to Financial Advice For Business Owners’.
If you’re planning your exit strategy and want to preserve your wealth, get in touch for a free initial chat with our financial planners.
Sources:
https://www.gov.uk/business-asset-disposal-relief
https://www.gov.uk/guidance/director-information-hub-members-voluntary-liquidation-mvl
