Planning your Exit
Exit Strategy Support for SMEs
Whilst exiting your business may seem something to consider in the dim and distant future, as a business owner you will know that circumstances can change, often when you least expect.
Having invested time, money and effort into growing your business, the prospect of a hasty and forced exit sooner than planned, is something that no-one would want to face.
Putting an exit strategy in place, no matter how far into the future your exit may be, provides you with security and peace of mind should the worst happen. It also helps to shape the timing and nature of future business decisions that need to be made to support your selected exit route, from setting your financial strategy to succession planning and your business structure.
Benefits of having an exit strategy include:
Your Exit Options
There are a number of different strategies you can use to exit your business, each with it’s merits. We have detailed below three of the most common.
We can provide support and guidance on selecting the right option for you depending on your own personal goals and the nature of your business as well as performing business valuations and financial due diligence.
A Management Buyout, or MBO, is when the management team of the company acquire a majority stake of the business by buying out the existing owner(s).
This can be seen as an easier option than some of the other types of exit and a major benefit is that the owner has the comfort of knowing that the business will be run by a team he knows and trusts. Likewise this can aid client retention post exit as there are minimal changes to personnel which gives comfort to clients.
The viability of this exit strategy is obviously very dependent on the make up of the management team. They may not have the skills or desire to take the business on, may have differing views on how the business should be run going forward, or be unable to raise the funding required to buy out the existing owner(s).
We can support business owners and management teams to decide if an MBO is viable financially both now or in the future as well as helping to raise funding. If an MBO is a potential exit strategy for your business get in touch for an exploratory conversation about how we could provide support.
A third party sale is when the business is sold in its entirety to a third party. This can be another business looking to grow through acquisition, an entrepreneur or private equity fund.
A third party sale can be an advantageous option when there isn't a clear purchaser from within the business or as a way to settle family disputes around ownership or future management. As there are no shortage of buyers it can result in a higher price being achieved for the seller.
Selling via third party sale does involve however a lengthy process to ensure the sale is completed correctly with considerable input and cost from third parties. The future success of the business can also be less certain if the new owners have less experience or if customers decide to leave because they are emotionally tied to the current owner. This increased risk means that the current owner is likely to be required to continue to work within the business for a period of time (often linked to financial goals) to ensure smooth transition. Their exit could therefore take longer and be more stressful than the other options.
We can support business owners with the assessment of the viability of a third party sale, helping to value the business and undertake financial due diligence as well as locate potential purchasers through our network of partners.
Need help deciding what strategy would be right for your business? Get in touch for an exploratory conversation about how we might be able to help.
An Employee Ownership Trust, or EOT is a Government initiative that allows business owner(s) to sell their shares to a trust owned by the current and future employees.
This option has significant advantages for the seller, buyer and the company and is often chosen by owners who want to leave a more structure legacy as it essentially creates an eternal business. It can also help to motivate, retain and attract employees as they know they will own a part of the business. As with an MBO it can be an easier route with less disruption to both employees and customers.
Similarly to an MBO however it is very dependent on having employees that are willing and have the skills needed to take on the ownership of the business.
Frequently Asked Questions
We have compiled a brief list of questions that we are regularly asked about planning an exit strategy which we hope you find useful. If you cannot locate the answer to your question, get in touch and we can help, alternatively, check out our Knowledge Hub for more information on a wide range of financial and business topics.
Yes, just like any organisation, you wont want or be able to continue working forever. Whether your exit is planned or not, having had some thought of what will happen to the business after you leave will help it run more smoothly when the time comes as well as help to ensure you get the maximum value for all of your hard work.
An exit strategy is a formal plan which details how you will eventually leave the business. This includes the type of exit you will use and even details of how the business should continue in the future and how much involvement (if any) you want to have going forward.
Every business and business owner is unique and therefore you cannot say that one type of exit strategy is best - they all have their pros and cons.
Based on our experience with clients across multiple sectors and of varying sizes, Employee Ownership Trusts have proven to be a successful exit strategy in most scenarios. Read above or get in touch to find out more how they might benefit your business.
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