As accountants working with entrepreneurs and the owners of family businesses we come across all sorts of businessmen and women. Many run excellent businesses and build a legacy they are able to leave to their families alongside sufficient wealth for themselves to allow them to live a prosperous life in retirement. We’ve noticed however that those who succeed when it comes to exit planning take a very proactive and positive approach to business and strategic planning. Those who are less successful, or sometime bemoan their ability to ever retire or sell their business for any real value, can be characterised as follows:
- the ostrich, who buries their head in the sand and tries not to think about it;
- the wide boy, who’s looking for exit before they have even really got a business worth exiting from, typically your internet and hi tech businesses where they have a fabulous idea they want to cash in on but don’t really want to stick around and have the hard work of running the business;
- last minute Harry, the average family business owner who wants to leave a financial legacy but doesn’t give them self enough planning time to really maximise the potential sales value of their business.
A business sale which maximises the value for the business owner is what we work with clients to achieve. It’s sad to see however how many business owners leave it too late or fail to get the right advice which means they don’t achieve this goal.
Our recommendations to all clients are to:
- Start planning for exit NOW, it’s never too early – your plan at this stage might be fairly lose but it’s better to start with a lose plan that can be tightened up later than start planning when it’s too late.
- Consider succession and exit planning at a Board meeting at least once a year. Involve your professional advisors in this meeting. Use their knowledge to inform the options open to you.
- Be flexible, don’t dismiss options today that might seem more suitable in 5 years time.
- Talk amongst your peers and business owners you know who’ve been through the process – learn from their mistakes.
- Once you’ve decided on the exit route structure your business, both in terms of people, management and systems and in terms of financial and tax planning, to generate the best possible return.
The most effective and profitable exits are those that are planned. You know what they say – ‘failing to plan is planning to fail!’
Andy Parker
Chartered Accountant