If you’re an entrepreneur, then you’ll have to think about selling your business at some point. However, this doesn’t happen overnight; you plan your exit strategy well in advance.
Taking a step back from your business is no easy feat. But, to make this transition as smooth as possible, it’s crucial to carefully plan for an exit that best suits your business, the people you employ and your personal goals. When you sell will largely depend on market conditions. However, if you have your exit strategy already worked out, then you can maximise your profits when you decide it’s finally time to hang up your boots.
There could be several reasons for you wanting to sell; maybe you fancy taking more of a backseat role, you’d like to retire, or you’re looking to start a new venture with the proceeds. Whatever your goal, financial planning can help support you throughout this process from the initial idea through to the completion of the sale, and your life beyond the business.
Here are five exit strategies to consider when selling a business:
- Liquidation – This is the simple route of closing the doors and selling all associated assets. It can be a fast process, however, it has the lowest return on investment.
- Keep it in the family – You may be planning to keep the business in the family, which requires planning to transfer the company over to a child or other relative. Although many entrepreneurs want to continue the family legacy, it’s a question of whether there is a suitable successor.
- Manager buyout – Although it’s hard to predict in advance, there might be someone in the company interested in buying it from you when you’re looking to sell. Advantages include a smoother transition and greater commitment to the legacy.
- Sell to another business – If you take the route of acquisition, you have the flexibility to negotiate the price and terms. However, it can be a costly and time-consuming process.
- Auction – Done correctly, taking your business to auction would deliver the best price and terms. However, costs can be higher, and the negotiation process is more complex.
How much is enough?
From a financial planning point of view, the main thing you need to know is how much is enough for you to live the life you want after the sale without the worry of running out of money. So, the first question to ask is what’s your number, and the second; is it realistic?
Here’s where we can help.
By understanding your vision for the future, and forecasting your wealth over your lifetime, we can predict how much you will need from the sale to afford your lifestyle aspirations.
Once you have an idea of the amount you need for the rest of your life, it’s important to compare this with the offers you receive. Knowing ‘your number’ will put these offers into a real-life context that means something personal to you.
If you’ve researched your options and you have an idea of what your business is worth to you the next step is to figure out when you’re going to sell.
By the time you come to sell, your business should be in the best shape to attract the right potential buyers. Most plans take between 12-24 months to complete, which is why the earlier you start thinking about your exit strategy, the better.
Holistic financial planning can help you navigate through this event in your life.
Our professional financial advisers can help you:
- Understand your options with regards to commercial property
- Ensure taxes are kept to a minimum
- Invest the proceeds in line with your goals
- Support your next steps with your financial wellbeing remaining intact
Helpful link – The UK government have put together a page on what your responsibilities are if you’re looking to sell your business. Click here to read their guide.