Every business owner should begin considering their exit strategy as early as possible.
The planning stage is as important as the execution – a well prepared strategy will ensure that value is optimised.
Most entrepreneurs only have one chance to sell their business, and maximising the value is therefore of upmost importance. The most common ways of exiting a business are:
- Trade sales – historically thought to yield the highest price, sales can be to competitors, suppliers, customers or anyone else with knowledge of the industry. A popular exit route for many owner managers.
- Management Buy Out – some believe an MBO is an ‘easier’ transaction as the buyers should know the business inside out, providing them and their financial backers with confidence.
- Flotation – the ‘Alternative Investment’ and ‘Plus’ Markets provide owners of SME businesses with a realistic source of long term exit.
- Sell the business to the next generation – ‘family dynasties’ are becoming rarer and we can advise on ways to pass it onto the future.
- Partial exits – involves selling part of the equity to a corporate or private equity fund. It provides a method of the entrepreneur turning equity into cash, whilst still retaining an ongoing involvement in the business.
- Involve your staff – a long term policy of staff ownership can provide a mechanism for exiting the business, as well as improving morale and reducing absenteeism.
See our page relating to the tax considerations which need to be considered when selling a business.
We understand the right time to bring in an external agent or lead advisor. It is important you can work with somebody who can provide you with the best advice, including:
- The right time to sell – if you look at recent history, 2009 would have been a bad year to sell, whereas 2007 would have been very good. Aside from these extremes, each sector runs through its own cycles, and exiting at the right time has a substantial affect on value.
- Prospective purchasers – it is important to ensure that you have a large number of the appropriate purchasers.
A good advisor will understand your business – its seasonality, profitability, key people and processes – they will not just be a good marketer/negotiator.
See our page on valuing businesses in company sales.