It’s never too early to start thinking about when and how you’re going to leave your business. Even in the early days it’s a good idea to plan what you might want to do next – wither that’s setting up another business or retiring. What will you need to put in place and how much money will you need to take those next steps? 
Why an exit plan is important 
Having a well-developed plan will give you choices. This might include, for example, what might happen if you were unwell for an extended period and unable to work. Do you have effective systems and processes in place? Have you encouraged members of your team to take on more responsibility so they can manage without you if they have to? Could you encourage your senior team members to plan a management takeover? 
If your goal is to sell your business you might want to set financial targets and the milestones you will need to reach to achieve them. 
You will probably need to plan many years in advance to be sure your objectives are met. You might also want to make sure everything is in place so you are ready to take advantage of market conditions to achieve the best rewards. 
Most importantly, once you have a strategy in place you can regularly review it to make sure it remains viable. We all know how suddenly things can change after the events of the last two years. 
Look at your options 
In reality you are unlikely to run a successful small business in the same way for 10, 20 or 30 years and then simply decide one day to close it down. Most business owners will need plans to manage growth. This might include deciding, for example, which parts of the business can be outsourced or when to take on employees because they can no longer do everything themselves. 
When you reach this point you will be starting to create an exit strategy that will allow you to spend more time doing certain things or stepping back from day to day operations. You might want to improve your work-life balance, retire, sell, or pass on a successful enterprise to other family members. 
Selling your business – if your objective is to build up a business to sell you will need to understand how your business will be valued by prospective buyers. Your accounts must be clear and accurate because your buyer will carry out a process of due diligence to be sure they receive value for money. To value your business, buyers will consider its history and future prospects, performance across your sector, recent sales and realistic projections. They will look very carefully at your cash flow, turnover, efficiency and profitability. 
You could sell just some of the shares in your business so you have a continuing income without being involved in running the business. Alternatively, you might pass on your customers and business assets to a new owner, although this could be less tax efficient. 
If selling is your plan, you might look to your competitors or other related businesses. If several are interested it could significantly increase your sale price. Selling a business can be time consuming, so it’s also important to have realistic expectations and start the process at the right time, perhaps two or more years in advance. 
Remember, you will be liable for capital gains tax (CGT) or corporation tax on the profits you make when you sell your business. However, you could be eligible for entrepreneur's relief to reduce your tax bill. 
Handing over control to family members – many families continue to run a business for several generations. If this is your plan it’s important to make sure that your family wants to continue the business. You will also need to consider whether they have the skills to run it successfully. 
The process isn’t straightforward and you will need to arrange a transition where you handover responsibilities and assets. Having worked so hard to build up your business you might want to continue receiving an income from it, so you will need financial advice about the most tax efficient way to arrange this. 
A management takeover – if you have personally selected, trained and developed a management team handing over control to them could be an ideal solution. This would involve a management buy-out. Alternatively, a new management team could take over as a management buy-in or you could consider a combination of the two. 
This could be a fast and efficient option although you will want to be confident that the transition won’t lead to conflict. You should also check the financial and legal implications before going ahead. 
Closing down – you can voluntarily liquidate your business and return the capital to its shareholders. You will need professional help to make sure all your business liabilities are met and that tax, employees, pensions and property are properly dealt with. 
Please get in touch for some advice if you are ready to start planning your business exit strategy. 
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