At some stage we are all going to retire from our businesses, so it makes sense to plan that day rather than leave it to fate. Pre-planning allows business owners to capitalise on their hard work, whether by receiving a payment for the business or ensuring its continuance in good hands.
Key considerations include:
- Identification of your preferred exit route. If you intend to bring in family members they will need time to develop in the business and you will want to assess their skills. If your management team/key staff are interested in a management buy-out, you will need to identify likely candidates. A third party sale requires consideration of the best way of selling and whether it is appropriate to sell the business as one, or as different parts. Advice from your accountant and/or a business sales agent or valuer will help identify and maximise value.
- Dependent upon your exit route you are likely to have various options, which may or may not be driven by tax considerations. Transfer could be by gift/bequest, creation of a partnership, or an outright sale, which could be the sale of assets or shares. Your business solicitor can help you understand the legal implications accompanying any option.
- Ensure the business is ship shape! If your exit route is a planned sale to a third party or your management team, the business value will be boosted by efficient operations, with up to date documents and policies that are effective for contracting with staff and customers. Failures here could be used by the potential buyer to knock down the price. Sale preparations take significant time, potentially several years, so should be commenced early. Again, your solicitor will advise you of the investigations a buyer will undertake so that you can ensure these are dealt with in order to ease the sale through. You don’t want to suddenly find your sale reliant on a third party, e.g. a landlord.
- Consider your future involvement and define your role - will you be a paid consultant, will you provide support for a handover period, or do you plan a gradual exit with continuing control, diminishing over time?
- Post sale/retirement is not the time to think about tax and investment planning – these considerations could affect decisions you make about your exit process and should be part of the planning stage.
With proper planning your horizon will be looking rosy!
Tracey Dickens will be pleased to discuss any issues mentioned in this article. Contact her at Birkett Long LLP on 01206 217326 or tracey.dickens@birkettlong.co.uk
