The art of the successful business exit

Insight | by Tom Tracy
Man with pensive expression

As entrepreneurs and business owners, we pour our hearts and souls into building successful businesses. But if you’re starting to contemplate your exit, and beginning to think about what that should look like, then in this article I’ve set out five fundamentals you need to address at the very beginning of the process, to help you to define your goals and ensure that you’re prepared for life after exit - because beyond financial reward, a successful exit should be the launch pad for the next successful chapter of your life.

1. Find the right team

Embarking on a business exit requires meticulous planning and expert guidance. Working alongside experienced advisors such as solicitors, accountants, and financial advisors, is indispensable in navigating legal and financial complexities. They will help structure the exit to minimise tax implications, mitigate risks, and ensure a smooth transition.

The first thing they will able to share is objective knowledge, insight, and a perspective that is all the more valuable for being professionally dispassionate. If you haven’t been through the process before, there is often, understandably, a reticence in discussing the sale of a business with those who haven’t been on the entirety of the journey with you. Founders and business owners often feel that they know their sector inside out and don’t need any external input, however working with the right professional advisors can add significant value – both for your business and for you personally. Often tasked with curating the ideal team of trusted advisors, we go to enormous lengths to ensure that those individuals fully understand your business and your goals for exit, and moreover, challenge you to think like a buyer.

We’ll help you understand the importance of the right legal advice. You’ll need corporate lawyers to help negotiate any potential earnout scenarios and be there to advise you on what will happen if something unexpected happens. We know this is the time to use real experts who specialise in these transitions and it’s not usually a role that can be covered by your inhouse team.

2. Define your goals and objectives

Define your financial and personal objectives for the exit. Are you looking primarily for a financial windfall, a transition into a comfortable retirement, or a legacy for your business? Once you’re clear on this, your team can start to help you create the exit plan you need to achieve your goal.

3. Timing is everything – start planning as early as possible

Generally, the earlier you begin to plan your exit strategy, the better. At least two years before you complete the transaction is ideal but there are some entrepreneurs who, even though they’re just transitioning from the startup stage, are already thinking about an exit process. That can be really powerful when talking to investors because it shows that you’re thinking about value drivers and are also aware of the risk mindset buyers might have.

Determine when you want to ideally exit the business, taking into consideration your personal goals, business performance, and market conditions. Your age and life stage may also play a part in this decision.

4. Outline your Transition Plan

Create a transition plan that outlines how the business will operate during and after your exit. This can help minimise disruption and reassure buyers. A key aspect of this is planning how the business will operate when you are no longer in charge. As difficult as it might be, you need to work out how to make yourself dispensable, so that prospective buyers can visualise the business without you in it.

Decide whether you want to have any involvement in the business after the exit. Some buyers may want to utilise your expertise, even if it is just during the transition period, and will often build this into the conditions of sale. You may also be able to get more for your business if you are prepared to stay on and realise the short term financial goals of the business. This process is often referred to as an ‘earnout’.

Consider how the exit will affect your employees and customers. Until the sale is public knowledge, maintain confidentiality to prevent negative impacts on the business’s reputation or employee morale. As your exit comes closer it is important to communicate transparently to minimise uncertainty. Plan on introducing new points of contact as early on in the process as possible and provide lots of reassurance to employees and customers that it will be very much business as usual.

5. Life after exit - Optimising your wealth and planning for the future

The sale of your business and the ‘sudden wealth’ it has the potential to create, can raise issues and present challenges that also need to be identified, and successfully navigated. Who will inherit and how once you’re gone? How should the money be put to use and ultimately what is it for?

As part of your preparations for a business sale, it is also important to consider your plans for the proceeds of the sale and to create a tax-efficient strategy to grow and protect the funds.

Working with a trusted financial advisor will help you make the most of your money, and putting a detailed plan in place will give you peace of mind, enabling you to live in the moment, safe in the knowledge that tomorrow is taken care of.

By ensuring that this forward looking plan encompasses estate, succession, and inheritance considerations, we can help you pass on your wealth in the most tax efficient way, providing your loved ones and beneficiaries with new opportunities - and potentially even creating a lasting legacy which will be remembered by your family for generations.

If you are starting to think about your business exit and would like to schedule an initial consultation, don't hesitate to contact us today.

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