Setting Your Goals for a Business Exit
Every business has a finite lifespan. Some may last for decades, while others may only last a few years. As a business owner, the life of your business is likely to be strongly aligned with your own life goals and personal plans for the future.
When the time comes to sell, it’s important to know what your goals are for the sale. Are you looking to retire? Or do you have a burning ambition to start a new venture? Let’s discuss how to best prepare for your business exit strategy.
Define Your Exact Goals from the Sale of the Business
When planning an exit, you must think carefully about why you’re selling up and what you want to achieve. This is a significant change in your life, your business career, and the fortunes of your company and employees.
Ask yourself what your true goals are from this exit:
- Do you want to retire, ease the pressure, and enjoy some freedom?
- Has this business journey come to an end, and you need a new challenge?
- Do you need to free up your capital to invest in other business or personal projects?
- Is there a worthy successor who’s eager to jump into the hot seat?
Whatever your motivation for a business exit, be sure to consider your options and decide on some concrete end goals.
Who Is Going to Take Over the Business?
Business sales are rarely a simple process. By putting the company on the market, you’re opening yourself up to a complicated negotiation process, financial agreements, and legal wrangling.
Knowing who will take over the business can be difficult to predict, but you do have several options regarding the end result.
For example, you could:
- Sell the business outright to a new owner and remove yourself from the company
- Sell the business but remain on as chairperson or a non-executive director (NED)
- Merge the business with a sympathetic competitor to aid their growth
- Agree to a partial or complete acquisition from a competitor or private equity firm
- Pass the business on to the next generation of your family
- Agree to a management buyout from your existing team
Outline How the Sale Proceeds Will Be Used
Once any sale, merger, or acquisition is complete, you’ll receive a substantial amount of money. But what do you intend to do with this money?
How you use the funds from the sale will vary, depending on your end goals for the business exit. As the vendor, this money can fund various life goals, so it’s crucial that you have a clear understanding of what you want to do with the sale proceeds.
Will the funds be used to:
Build a nest egg for retirement:
If your goal is to retire, the price you sell the business for must provide enough funds to comfortably see you through retirement. This means understanding your life goals and your outgoings and budgeting accordingly.
Form the capital for a new business idea:
You might be ready for a new business challenge. If so, your sale price needs to cover the startup costs needed to found a new business, while also covering your personal financial needs in the early stages.
Gift money to your family and the next generation:
You could want to pass on your wealth to your family. If that’s the case, you need to factor in the money you plan to gift while also considering your own financial needs over the coming years.
Make donations to charities, social causes, or political interests:
If you have particular charities and causes close to your heart, you may want to donate some of your sale proceeds to these institutions. Whatever you decide to donate, make sure you know the tax implications and how this affects your tax bill.
Invest the money to create a return:
You may want to invest the sale proceeds to create a healthy return and increase your wealth. This could mean investing in other startup projects, buying shares in growing companies, or putting your money into a pension scheme or high-interest savings account. Again, knowing the tax implications of any investment is vital if you’re going to invest in a tax-efficient way.
Getting Ready to Exit the Business
Selling your business is a big move, and it’s invaluable to have the best possible support and advice to guide you through the sale process with a well-prepared business exit strategy. Read more about the importance of a business exit strategy here.
Talk to your accountant, tax agent, and other business advisers and run your exit goals past them. As a founder, it can be difficult to be objective about your business. However, external advisers have the advantage of being able to look from the outside in with real objectivity. This helps you get independent, expert advice on your exit goals, strategy, and tax planning.
If you’re considering selling up and moving on, please get in touch. We can give you the advice you need and set you on track for a successful and profitable sale.
