The Importance of Exit Planning

Reduce your tax bill | Exit Planning

Many business owners and major shareholders tend to delay putting in place an exit planning strategy. This is ludicrous when considering that at some stage, whether it is through retirement or not, you are going to want to exit from your business. We have therefore provided some tips and advice to help you in this process.

When you exit, you will want the best remuneration package possible; in order to get to this stage, you need to start planning several years in advance – it is not something that can be achieved overnight. So, where do you start? To begin with you need to take an objective look at your business and realistically set out your aspirations, both personally and for your company. The next step is to answer the below questions:

  • What are your value expectations and requirements?
    • How and when will you reach this value?
    • How much income will you require once you have left?
    • How much will your future income be reliant on your business sale?
    • Is your current pension plan sufficient in meeting your future needs?
  • What are the reasons for your exit?
    • Retirement?
    • No longer need to work?
    • Spend more time at home?
  • What routes are available for your exit?
    • Trade sale – cash out completely
    • Expand/ Merge the business with a private partner – manage the sale so that you receive a redundancy package, or take some cash and maintain a board position
    • Refinance – take some cash and maintain some control of the business

When you have clear answers to the above, you can begin your exit strategy, setting realistic goals that will guide your business over the coming years. These goals must be based on your previous business development; they need to be achievable if you want to demonstrate the potential of your business.

Once you have a plan, to get your business in a saleable position you need to:

  • Update your company’s business plan and forecasts in order to support your exit strategy
  • Understand any obstacles that can prevent you reaching your goals and outline how you will overcome them
  • Address any internal issues that may have a negative impact on a sale
  • Prepare a succession plan – what will happen when you leave?
  • Identify the type of buyer, investor or partner – you can then focus on raising your business profile to these people

You are now well on your way to achieving your exit planning goals. When you have reached the stage to sell your business, remember to not forget the small things, such as tax. You have reached your goals and will be receiving the best remuneration package for your efforts; therefore ensure you don’t pay too much tax on the profits and on your future income.

If you need any further advice, we can help you plan your departure from your business to ensure you leave at the best time for you, and receive the best return. For further advice, contact Lee Manning at lee.manning@raffingers.co.uk.