Exit Planning for Business Owners

If you’re thinking about selling your business in the next four or five years. The difference between a good exit and a great one, comes down to how early you start planning and what you do in the years leading up to it.

Planning for a successful exit starts early

A couple of questions to ask yourself:

What do you want to walk away with financially?
Do you want a clean break from the business or are you open to staying in some capacity?
Who is your likely buyer: a trade buyer, a private equity firm, or a management buyout?

Build a business that doesn’t depend on you for the future

This is an important factor as part of the business valuation. The buyer isn’t just purchasing your revenue. They’re purchasing a business they can run and grow without you. If the business relies heavily on your relationships, your knowledge, or your day-to-day involvement. This will represent a risk to a buyer and reduce the value of your business.

A couple of questions to think about:

Do you have strong management in place who could run the business without you?
Are your key client relationships held by the business or by you personally?
Are your processes and systems documented and repeatable?
Could the business operate and grow if you stepped back tomorrow?

How to understand your valuation for exit planning

Most businesses are valued on a multiple of EBITDA (earnings before interest, tax, depreciation and amortisation). If you want to maximise your sale price. Understanding what drives that multiple and what suppresses it is key.

Factors that increase your multiple:

Strong, recurring or contracted revenue.
Consistent year-on-year profit growth.
A diverse client base with no over-reliance on one or two clients.
A strong management team.
Clear growth potential that a buyer can capitalise on.
Clear well-maintained financial records of the business.

Factors that reduce your multiple:

Reliance on the founder.
Inconsistent or declining margins.
Untidy or unclear financials.
Outstanding or unsatisfactory legal, tax or regulatory issues.

Get your financials in order, before due diligence finds the gaps

Buyers and their advisors will scrutinise your financials in detail during due diligence. The clearer your financial records and data centre, the more straightforward the process will be.

This means getting on top of:

Management accounts; these are regularly produced, accurate, and in a format that tells a clear story.
Personal and business expenses; must be clearly separated with no grey areas.
Historical tax or accounting issues; which are identified and resolved well before you go to market.
Financial reporting; showing a consistent picture of growth, profitability, and financial health.
Key business contracts; what contacts are currently in place for customers, suppliers and leases.

At Aspreys, we work with business owners who are planning for the future. We ensure your financials are not only accurate but structured in a way that supports a strong valuation when the time comes.

From producing reliable management accounts through to identifying and resolving any historic issues before they surface in due diligence, we help you present your business in the best possible light, giving buyers confidence and giving you the strongest possible position at the negotiating table.

How to structure your business in a tax-efficient way for exit planning

The way your business is structured has a significant impact on the tax you pay when you sell. By getting the right structure in place early, this will make a difference to your net proceeds.

Key areas to consider include:

Whether your current corporate structure is the most tax-efficient for a sale.
Business Asset Disposal Relief (formerly Entrepreneur’s Relief) and whether you meet the conditions to qualify.
Whether it is a share sale or just an asset sale which will generally be less advantageous.
Employee share schemes that could incentivise your team to grow the business before a sale and support retention through a sale process.

The advisors you need when planning a business exit

Surrounding yourself with the right advisors early, gives you the best chance of maximising your outcome and avoiding costly mistakes along the way.

Your exit advisory team should include:

An accountant; that have an M&A advisor and a tax director so ensure specialist support at each stage of the deal.
A solicitor with experience in business sales and acquisitions.

At Aspreys, we provide both the accountancy and tax support that sits at the heart of a well-planned exit. From keeping your financials in strong shape year on year, to advising on the most tax-efficient structure for a sale, and assisting you through a sale process, we work alongside ambitious business owners who wish to maximise the return from their hard work.

Find out more about how we support growing businesses through our Business Advisory Services

Thinking about your business exit strategy?

Whether you’re four years out or just starting to think about what an exit might look like, it’s never too early to start the conversation.

Get in touch with the team at Aspreys and let’s talk about how we can help you build a business worth buying.

[email protected]   I    01932 485 325   I   aspreysuk.com

Accounting, Scaling Businesses

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by Sarena Harwood

Accounting, Business Owner, Scaling Businesses, Tax Advice

The Exit Planning for Ambitious Entrepreneurs