Prepare for landing: getting your exit strategy right

When the poet T.S Eliot wrote ‘in my beginning is my end’ in his famous Four Quartets, he probably wasn’t thinking about entrepreneurship. Nonetheless, taking his advice and thinking about your successor and exit strategy at the start of your business journey could save you a whole lot of pain later.

“Many people start a business and don’t think of the end goal which will maybe be selling the business. Setting up your business and making it sellable you should be doing along the way while building the company,” says Katie Godfrey, who has set up and sold beauty salons under the name KG Salons.

A well-run business should be thinking of succession planning as well as ensuring it is on a firm financial footing for the future. Whatever the outcome is, it will be easier all-round if well planned.

Know your options

The size, success and sector of your business will all help to determine the best exit strategy, but considering the suitability of different outcomes will help you to make the best decision.

“All avenues will have their pros and cons,” says Neil Rudge, head of enterprise at business bank Shawbrook. He says that trade sales, sales to private equity businesses and stock market listing are all usually considered, but there are some other possible structures that owners might not have thought of.

“An increasingly popular exit strategy that we’ve been seeing is the Employee Ownership Trust,” he says. This type of exit allows you to sell your business to employees capital gain tax free,

“The transition can be gradual, ensuring continuity and stability. And as employees become beneficiaries of the Trust, they have a vested interest in the success of the business, which is highly motivating,” Rudge says.

Consider all factors

When deciding which type of exit is right for you, you will need to consider how the business and you, as an individual, will be affected by the exit. Considerations for the business should include:

• Business continuity
• Employee impact
• Business health and growth post exit

These are all considerations that you should bear in mind as you build your business too, ensuring that you delegate and train staff to continue without you.

As well as considering the future of your company, you will need to consider your own needs. These may include:

• Maximising financial value
• Ensuring your legacy is preserved
• Keeping the right level of control (if any)

Ifty Nasir, CEO and founder of equity platform Vestd, works with entrepreneurs on their exit strategies and says that all have differing views on how best to leave their business. “While some dream of walking away with a big cheque, others choose to stay involved with the business with reduced responsibilities and more financial security,” he says.

Take practical steps

Whatever exit strategy is right for you, getting the details right will lead to success. Nasir says that a focus on correct paperwork will pay off. “It is vital for due diligence,” he says. “Most buyers will expect to see two years of consistent financial records so good bookkeeping is very important.”

Business marketer Tracy Heatley says that you should call in the experts before this. “Engage the expertise of an accountant, tax expert, and financial advisor at least three to five years in advance. By doing so, you can ensure a tax-efficient exit and protect your personal finances.”

Consider your wellbeing

While business exits involve a lot of focus on the bottom line, it is important not to neglect the psychological impact of selling up and moving on. “The sudden reduction in work hours and the absence of our familiar work environment can be overwhelming,’ says Heatley.

“The consensus among successful business owners is to fill your time with positive and enjoyable activities, stay active, and cultivate new daily rituals. Don’t let this phase overwhelm you; embrace it as an opportunity for personal growth and fulfilment.”

Rosie Murray-West

Rosie Murray-West is a freelance journalist covering all aspects of personal finance, as well as business, property and economics. A former correspondent, columnist and deputy editor at The Telegraph, she now writes regularly for publications including the Times, Sunday Times, Observer, Metro, Mail on Sunday, and Moneywise magazine.