It’s a fact of life that every business owner will at some stage exit their business. Unless there are multiple shareholders in the business who are willing to acquire the exiting shareholder’s shares at an agreeable price, the owner manager will need to consider their exit route in advance, to ensure they can enjoy their retirement and the business, employees and customers can continue post-exit.

In simple terms, the options are to either:

• Transfer the business to family members
• Sell the business to a third party
• Sell to an Employee Ownership Trust
• Liquidate the company

The route you take will depend on your own goals, circumstances and priorities but also on the options available to the business itself (internally and externally).

Transfer the business to family members

Transferring a business to family members is definitely one option but this should be a managed process with a clear handover period and carefully set expectations.

Tax planning can help to ensure no nasty surprises if and when family members later decide to sell.

Consideration needs to be given to reliefs available, especially when there is property or cash held within a business, to ensure an appropriate strategy is adopted.

Family members need to understand the responsibilities and duties to keep the business going.

The owner may also wish to consider share options as a means to reward and incentivise key employees to stay with the business through any transitional period.

Where many parties are involved, an independent third party valuation of the business will help to ensure that all parties receive fair value.

Sell the business to a third party

Selling a business is not as straightforward as selling a car, is much more time consuming, costly and complicated than selling a home, and often it’s difficult to know the value of the business before going to market.

In many cases, business owners find their business is not saleable.

The most common reasons for this include:

• Heavy day to day involvement of the owners
• Owners not paid a market rate salary / not easily replaceable
• Over reliant on a small number of customers/suppliers
• Low profitability
• Poor systems/record keeping

It is worth reviewing the business ahead of any potential sale to see where improvements can be made that will make the business more saleable and increase the value to buyers.

Sell to an Employee Ownership Trust

Liquidate

Liquidating a business is often a last resort for business owners. Without proper planning, and especially when left until after the death of the owner, or when forced to liquidate due to insolvency, liquidation can cause great stress to the owner or their family as well as disruption to employees, customers and suppliers.

In conclusion

It is often more difficult for business owners to exit their business than they realise. Either they are not yet ready to give up the passion they’ve spent many years involved in, or they haven’t prepared the business to make it saleable when they do wish to exit.

At Shaw Gibbs we can help business owners understand the potential value that can be achieved through different exit strategies, including:

• Selling to a trade buyer
• Selling to private equity
• Selling to employees
• Transferring shares to family members
• Winding up the business

In addition to this we can discuss the best way to structure the deal so as to minimise tax, how to reward key employees, and advise on strategies to ensure business continuity.

Our corporate finance team can work with you to make the business more saleable, to identify the right buyers, negotiate on price, structure and terms, and manage the sale process for a successful exit, leaving you to enjoy your retirement or start a new chapter.