At some point, every business owner reaches that big question: “Do I keep going, or is it time to exit?”
Sometimes the decision is forced, maybe due to health issues, personal circumstances, or a market that’s shifted beneath your feet. But more often than not, it creeps up on you. One day you’re heads-down building the business, and the next you’re wondering what it would actually take to step away.
As accountants, we tell all our clients that exit planning isn’t something you do in the final few months before you sell. It’s something you should be thinking about years in advance. Here’s why and what you need to know.
What actually is exit planning?
Exit planning is the process of preparing yourself and your business for the day you’re no longer running it. That might mean selling to a third party, passing it to family, transitioning to employees, or simply winding things down.
It covers three big areas:
- You: What do you actually want? When? And what does life look like afterwards?
- The business: Is it in a state where someone else would want to buy it or run it?
- The deal: What’s the best route, and how do you structure it to keep as much value as possible?
Good exit planning brings all three together. Bad exit planning ignores one or more of them, and it’s usually the first one.
When should you start thinking about it?
Ideally? Years before you actually want to exit.
I know that sounds excessive, but hear me out. The things that make a business valuable – recurring revenue, a strong management team, clean financials, low owner-dependency, etc – take time to build. If you wait until you’re ready to sell, you won’t have time to fix the problems that could tank your valuation.
We’ve written about this in more detail in Stick or Twist: Are You Ready to Exit Your Business? It’s worth a read if you’re at that crossroads.
The emotional side of exit planning
Let’s be honest, this isn’t just about spreadsheets and tax.
For most business owners, the business is wrapped up in their identity. Walking away, even with a big cheque, can feel like losing a part of yourself. That’s normal, and it’s why the “what next?” matters just as much as the “how much?” question.
When it comes to exit planning, it should include thinking about what you’ll do with your time and energy after you’ve handed over the keys.
What are your exit options?
There’s no single way to exit a business. The right route depends on your circumstances, your goals, and what kind of business you’ve built. Here are the main options:
Trade sale: Selling to another company, often a competitor or someone in a related industry. Usually the highest price, but can involve earnouts and integration headaches.
Management buyout (MBO): Selling to your existing management team. They know the business, which reduces risk, but may need external funding to make it happen.
Employee Ownership Trust (EOT): Selling to a trust on behalf of your employees. There are significant tax advantages here, including potential exemption from Capital Gains Tax on the sale. We’ve written more about using an EOT as an Exit Route here.
Family succession: Passing the business to the next generation. Emotionally appealing, but requires careful planning around tax, control, and capability.
Liquidation or wind-down: If the business isn’t saleable, sometimes the best option is to extract what value you can and close it down cleanly.
Want to know more about these options? We’ve covered the pros and cons of each in Business Exit Strategies: The Pros and Cons.
Structuring for exit: the technical bits
Once you know what you want, there’s the question of how to structure it. This is where it gets technical, and where good advice pays for itself.
Growth shares can be used to incentivise key employees while ring-fencing the existing value for founders. Useful if you want to retain talent through a transition.
Family Investment Companies (FICs) can help pass wealth to the next generation in a tax-efficient way, while retaining control. We’ve written about FICs in detail if you want to explore that route.
Holding company structures can separate trading activities from investments, providing flexibility and protection as you approach exit.
SEIS and EIS schemes may be relevant if you’re planning to bring in external investment as part of your growth-to-exit strategy. We’ve covered how to apply for SEIS/EIS and whether sweat equity qualifies.
Creating an actual exit plan
All of this thinking needs to go somewhere, and that’s where a formal exit plan comes in.
A good exit plan sets out your personal objectives and timeline, the current state of the business, your preferred exit route, key milestones, tax considerations, and who needs to be involved.
If you need help putting this together, we’ve written a step-by-step guide for How to Create a Business Exit Plan.
The bottom line
Exit planning isn’t about reacting to your situation once you get there, it’s about being intentional. Whether you want to sell in two years or twenty, the work you do now determines what options you’ll have later. And as we all know, more options are always better.
Our advice? Start early, think about what you actually want – not just the money, but the life – and get advice from people who’ve helped other business owners through the process.
Thinking about your exit? Not sure where to start? Get in touch! We help business owners plan and execute exits that work for them. |
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