Every business has a finite lifespan. Some may last for decades, and some may only last a couple of years. As the owner of a business, 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 up, 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?
Define your exact goals from the sale of the business
At the point of planning an exit, you need to think carefully about WHY you’re selling up and WHAT you want to achieve. This is a huge 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 itching to jump into the hot seat?
Whatever the motivation for a business exit may be, 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 and by putting the company on the market you’re opening yourself up to a complicated process of negotiation, financial agreements and legal wrangling.
Knowing who will take over the business can be difficult to predict, but you do have several options when it comes to the end outcome.
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 be on the receiving end of a substantial amount of money. But what do you intend to do with this money?
The way you use the funds from the business sale will vary, depending on your end goals for the business exit. As the vendor, this money can fund various different life goals for you, 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 will need to provide enough funds to see you comfortably through your retirement. This means understanding your life goals, 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 – it could be that you 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 that are close to your heart, you may want to donate some of your sale proceeds to these institutions. Whatever you decide to donate, make sure that you’re aware of 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 kind of 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, where it’s invaluable to have the best possible support and advice to guide you through the business sale process.
Talk to your accountant at Accountants247 in Surbiton and run your exit goals past them. As a founder, it can be difficult to be objective about your business. But 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, your strategy and your tax planning.
If you’re thinking about selling up and moving on, please do get in touch. We can give you the advice you need and set you on track for a successful and profitable sale.
