The importance of a well-managed exit plan, and how to pull it off

Risk and uncertainty are a fundamental part of owning a business. However, a variety of recent events (the Covid-19 pandemic, Brexit, the war in Ukraine, record levels of high inflation) have conspired to bring these factors to the forefront of many business owners’ minds.

As a result, many of them are now in the uneasy situation of having to re-map previously thought-out succession plans and exit strategies, including one route few of them would have previously chosen: selling their company before they’re ready and, maybe, for less than it’s worth.

If you are looking to move forward your exit plans and want to make the most of your business before you say goodbye to it, then JW Hinks can help you execute a well-thought-out managed exit strategy. In almost every case, this will involve selling your business. There are five ways you can do this:

• Close the company and sell the assets
• Sell to a relative
• Sell to an employee
• A direct sale to a third party
• Gradual buy out

What is important when preparing for a sale?

First, you need to ensure that your business is a complete and functional entity despite your absence, if you want it to realise its true value. That means making sure you have procedures and processes in place so that the firm isn’t dependant on you. After all, no one wants to buy something that stops working when the seller leaves the room – and many experienced business people will recognise when that’s the case.

Second, you should determine what you want your legacy to be: How do you want to be viewed by your peers in the industry? Or your former employees? Do you have goals for your company that you hope it will achieve even after you’ve sold it? How do you want to be remembered?

Third, you should do everything possible to maximise your profit. In other words, make sure you’re not making decisions to reduce your tax liability, because you’re attempting to build a clearly profitable firm. Outsized profit is likely to be a compelling factor when it comes to third-party valuation and, in the long run, will outweigh potential tax breaks you could have pursued instead.

The best time to start planning your succession is right now

A succession strategy is a plan for winding down your engagement in a company. For most people, this entails preparing the company for a change of ownership. A well-thought-out departure strategy can boost your sale price while also ensuring the business continues to prosper after you’ve departed. This is also known as succession planning.

It’s a good idea to consider this long before you need to sell so in order to maximise the perceived value of your company which, in turn, will lead to a better sale for you. It’s also important to realise that retirement doesn’t have to mean going from 100% to 0%. If your business is capable of running without you at the helm, but you still want to be involved, you should consider selling some, but not all, of it; or, you could consider floating other ways of staying involved as part of the sale, such as making it conditional on yourself taking a non-executive directorship for a minimum specified amount of time post-sale.

However you want to do it, JW Hinks is more-than capable of helping you plan a managed exit that will do your business – and your plans for the future – justice. Call us on 0121 456 0190 to see how we can help.