5 common exit strategies for your business

Allow yourself to daydream for just a minute. 5 years from now, if you had to picture yourself in your ideal scenario, where would you be? What would you be doing?

Chances are you wouldn’t be dreaming about sitting behind your desk, but a more likely scenario would be beyond your current business. But this doesn’t happen by chance and as an entrepreneur or founder, we need to consider the end long before we progress on this journey. 

Without an exit strategy, you might never get to realise your daydream, or if you do, it’ll be at a much lesser level than expected. Few founders focus on exit planning until they reach a certain point in their lives or a significant event happens. But if you start with the end in mind and you build a plan to achieve the perfect business exit for you, then you’ll do so from a position of strength and when the time comes to sell your business, you’ll be able to command a higher price.

Well, that’s the aim anyway.

What is a Business Exit Strategy?

Many businesses fail in their first year. A significant percentage fail over time. But for a number of founders, there will come a time when the decision has to be made about selling the company. For some, this will happen as they age or become unwell, but for others, this is a considered process where they want to complete a strategic exit to maximise the value of the effort and hard work they’ve put in.

Exit strategies provide the roadmap or plan for successfully selling or leaving your business. But, they are often left to the time when people start thinking about the end, but in reality, they should be considered when starting and building the business. The earlier the better.

This is for many reasons, but the most important is that running a good business and one that is ready for sale are 2 parallel journeys. The more focus you have on this from an early stage, the better your position when it’s time to sell.

But for many entrepreneurs, it can be hard to visualise leaving the business you built or are building. Because often the focus is on the here and now. Getting work done often takes priority. But to successfully exit your business and extract maximum value when the time comes to do so, founders must create the plan well in advance of it being needed.

I always tell the story about my own exit. Our business was built to one day be sold. From day 1, there was an exit in mind. What that looked like was unknown. And our business was growing, and increasingly profitable. In turn, this made it attractive to those who were looking to grow through acquisition. When the first approach was made, we were not for sale, but we were ready for it.

This state of readiness allowed us to negotiate from a position of strength and extract the maximum value from the exit.

If someone put their hand up to buy your business today, would it be in the best shape to get maximum value? If not, you need to consider which exit strategies might suit your ambitions and build a plan to get there. And if you need help developing this, please do get in touch!

5 Most Common Exit Strategies

When considering your business exit strategy, there are certain factors that will influence your decision. It may be your personal circumstance, the value of the business or indeed its future potential. Weighing up the options is crucial, and yes the decision is yours. But the most important factor is that you are preparing the business, no matter the eventuality. 

When planning an exit strategy for a business in the UK, you may wish to consider these 5 common reasons: 

Sell To A New Owner

Intergenerational Business Transfer

Liquidate And Close The Business
Initial Public Offering

Merger & Acquisition (M&A)

1. Sell to a New Owner

Finding someone who is willing to buy your business can take a lot of time and effort. Conversely, the opportunity to do so might happen naturally as you present it for sale. 

Many founders have significant networks both inside and outside their industry, and these can often be a primary source of willing purchasers. Don’t just think about companies you know, but individuals and groups of investors. How would your business make a good or complementary fit to theirs?

The sale itself can be structured as an asset or a share purchase. But this is something you need to speak to your solicitor and accountant about. They will advise you based on your specific circumstances and the legal requirements based on your company status.

2. Intergenerational Business Transfer

Many entrepreneurs dream of passing over the reigns to their children and an intergenerational transfer involves passing on the ownership and management of the company to the next generation. This can happen at any time in your business journey when you feel the business is in the right position to do so.

We’ve worked with one family owned business moving into the 4th generation of ownership and this was done with careful consideration of legal and financial liabilities. In an instance like this, shares may be sold or gifted and there may be contractual obligations for your children to pass the business on to the following generations.

There are many considerations with intergenerational transfers and ensuring the business has the right skills, knowledge and experience to continue on its journey is a core feature of this exit strategy.

3. Liquidate and Close the Business

The most straightforward way to exit your business is to close it down. For many reasons this is often the best solution, especially when the business is no longer trading profitably or has run into trouble. If you liquidate and sell the assets of the business, this must be used first and foremost to pay back any debtors. Your legal obligations stand under this business exit strategy but always speak to your accountant about the most appropriate and effective way to minimise current and future liabilities.

4. Initial Public Offering (IPO):

An IPO involves taking the company public by selling shares to the general public through a stock exchange. 

This exit strategy allows the founder(s) and early investors to sell a portion or all of their shares and realise their investment. 

It would be rare for smaller service businesses in the UK and Ireland to consider an IPO as these are often complex in their nature and require significant regulatory oversight and the costs that come with that.

In Northern Ireland, there are only a handful of publicly traded homegrown companies, but this is not to say that you cannot achieve this status also.

5. Merger & Acquisition (M&A)

In an M&A exit strategy, the business is either acquired by or merged with another company. This is comparable with selling to a new owner and probably the primary thought most people have about selling and exiting their business. The terms of the merger or acquisition are negotiable and vary from deal to deal.

This was the extra strategy that we eventually settled on as the business was approached by an interested party.

The acquired company may be absorbed into the acquiring company, or it may continue to operate as a subsidiary or division.

There is no right or wrong to follow, That suits your business and object. Each has its own advantages and disadvantages and its own tax and legal implications.

The most important thing is that you take action on your extra strategy early so that you can maximise the value no matter which path you take. The most suitable astrology will be the one that works to your strengths and minimises your weaknesses.

At Move at Pace, our singular focus is to help you build the business you dreamed of when you became an entrepreneur while providing you with options to realise maximum value at a specific time or when the opportunity presents itself.

Check out our long-form videos on Youtube where we cover all manner of topics including exit strategies and business growth topics.

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