Exit This Way: What You’ll Need to Know About Exit Planning

Exit Planning

Whether you’re retiring or selling to move on to your next challenge, rigorous exit planning is essential.

If you’re looking to sell the business, you’ll want to achieve the best possible price, while ensuring the most favourable tax position for your shareholders at the same time. It’s not an easy task, and many business owners who have gone through the sale/acquisition process have been surprised at how intense and stressful it can be. But the rewards can also be very much worth the stress and energy – if you get it right.  

Factors to consider

There are many more factors that will influence the sale price of your business beyond the basics such as turnover or profit. Your exit planning process will include reviewing these factors, and ensuring each of them is robustly managed to optimise your sale price. 

The factors include: assets and property, intellectual property, pensions, contracts, sales patterns and perhaps most importantly – the numbers. 

Any potential buyer will go through the Due Diligence process before completing the purchase. This is an extensive and very deep dive into every aspect of your business, allowing the potential buyer to assess if they wish to proceed with the purchase, and at what price. The Due Diligence process can be extremely stressful for the business owner and leadership team due to the level of detail that must be gathered, analysed and explained, all at the same time as actually running the business. No wonder it’s stressful! 

An experienced Financial Director can help to take the strain of the Due Diligence process, project managing it internally to take some of the pressure off the shoulders of the senior team and freeing them up to keep the business on track throughout the process. 

Start exit planning early

As well as managing the actual Due Diligence and the sale itself, a strong Financial Director can add thousands of pounds to the sale price of your business through careful and considerate preparation for exit. By starting the planning and preparation process as early as 5 or even 10 years before you plan to exit you can ensure that, when the time comes, you have a much higher likelihood of achieving the sale price you would like. 

You don’t need to have a full time FD on board (with the associated high salary costs), to prepare for exit: a part time FD can add the same value as a full time FD, at a fraction of the cost. Your FD will ensure the business has access to robust, accurate management information, and will introduce the necessary processes and systems to ensure this is the case if you don’t already have accurate and timely MI. S/he can gather the necessary information to prove the value of your assets, and ensure any property held by your business is held in the right way to be attractive to potential buyers (rather than being seen as potentially risky liability). If you haven’t already protected your intellectual property, your FD will want to ensure that patents copyrights etc are put in place or applied for – and may also be able to access R&D tax credits or grants for the business in addition, increasing its value and attractiveness for a potential buyer. 

An important role your FD can also perform is to act as introducer to Corporate Finance, Legal, and other professional advisers who will play a role in the exit process. As most business owners sell a business only once, or at most a handful of times, it’s difficult for them to know which adviser is right for them. An FD with experience of multiple sales under his/her belt can easily assess and select the most appropriate one for the circumstances.

By planning ahead, and ensuring you have a strong, experienced FD to call upon, you can ensure you have the very best chance of optimising the price you can achieve with the sale of your business – so even if that exit may still be a decade away, there’s no time like the present to get your exit planning off to a great start by finding the right part time FD to support you through it.