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Planning your exit: When is the right time to leave your business?

It has never been more important to be able to judge when the right time has come to exit a business. Chris Hird, Corporate Finance Associate Partner at Haines Watts discusses the importance of having a robust exit strategy.

Getting ready to exit a business is never a decision that an owner takes lightly. Often individuals have built the business from the ground-up, or it has been in the family through generations meaning there is an inevitable emotional bond.

While the preparation process usually involves years of planning - taking everything from timing, valuations, due diligence and the future of the business into consideration - circumstances and events out of your control can often throw plans into disarray.

In the aftermath of the pandemic, the ability to determine right time for your exit has never been more crucial.

Is now the right time to exit?

There is no formula to work out when the right time is for a business owner to exit. It really depends on the owner, the business, and the people behind it.

While the current climate has made many owner-managers question whether now is the time to sell up, some companies have become more efficient, agile and even opened up into new markets. In some cases, this has given business owners the motivation to stay on.

However, huge events like the pandemic have the ability to wipe out everyone’s best-laid plans, and as a result, I’ve seen a significant increase in the number of businesses looking for objective business valuations.

Understandably, those who have invested huge amounts of time, energy and their own money, are contemplating whether they have the capacity to carry on. It can be hard conversation helping a business owner to make a decision that was not part of their plan, but sometimes it requires decisive action for the sake of the business and the owner.

For most businesses though, the balance sheets might be temporarily down but if there is a clear recovery path then delaying exit plans and waiting for things to improve could yield significant benefits.

What are your objectives?

Understanding your own goals is critical. You need to think practically about what you want to achieve and how you are going to do it.

Will your exit be a clean break with the business? Are you planning to step back from the business entirely, or will it be a gradual process of reducing your days? Do you want to find a buyer, or is there someone in your team who you would like to take over? If so, is your team ready for your exit – buyers won’t want to see all of your knowledge leave with you.

Whilst they are just the start, these are all questions that should be front of mind and reviewed regularly.

The importance of planning ahead

A well thought out exit plan should play a crucial role in any owner-manager’s overall strategy. It can help to protect and reward your current employees; give you control, clarity and confidence throughout the process; and help to protect your own wellbeing in an inevitably stressful time.

If you are looking to sell within the next few years, create a timeline with key milestones and review it regularly - the recent fears over a rise in Capital Gains Tax are prime example of why you should be mindful of your wider environment.

In the lead up to the Spring Budget, I spoke to several owner managers looking to exit their business prematurely because they did not want to lose out on the value they had built up over the years. There was a sigh of relief when the Government announce a five-year CGT freeze, enabling breathing space and time to map out a clear exit strategy for those looking to take a step back.

Find the right advisor

For most business owners, exiting a company only happens once in a lifetime. Therefore, having the right support pillars around you is absolutely crucial.

Regardless of the circumstances, the basis of our advice is shaped by the need to achieve the most positive outcomes possible for our clients, whether that is maximising the value of your business, offering strategic direction for your plan or even helping you to find the right buyer in an efficient and discreet manner. If you are considering exiting your business, get in touch to find out how we can support you.

This was posted in Bdaily's Members' News section by Haines Watts .