Before Covid, the demographics of the typical business owner reflected an older individual who was often far past the usual age of retirement. After the pandemic, Brexit and a war that brought about an energy and supply crisis, these business owners have found themselves facing what some may see as one-too-many challenges in their path.
Many of these business owners then approach their trusted accountants for advice on how to achieve an exit. In a recent webinar, So Your Client Wants To Sell? Kirsty McGregor took viewers through the three possible exit routes that should be considered.
1. Passing the Business to Family: If there's another generation in the family willing and capable of taking over the business, this can be a viable exit route. However, this isn't just about handing over the reins. It involves careful planning from both a tax and operational perspective. You need to ensure that the next generation has the necessary skills to run the business effectively. This might involve training and mentorship programs. From a tax perspective, you might need to consider setting up a trust or other structures to minimise tax liabilities.
2. Sell for a Capital Sum: There are two options here, either to sell to a trade buyer (in the UK or overseas) or to sell to individuals or a group of individuals. These individuals could be the management team (MBO), it could be an external individual that comes in (MBI), or a mix of the two, it could also be a management-led employee buyout (MEBO) using an employee ownership scheme. Kirsty explained that MEBOs are becoming increasingly popular.
3. Winding Up the Business: In some cases, winding up the business might be the only option, especially if the owner is no longer able to run it. This process involves settling any debts, selling off assets, and distributing the remaining assets among shareholders. It's a complex process that requires careful management to ensure all legal and financial obligations are met.
Planning your exit strategy is as important as running the business itself. It's advisable to engage with your advisors early on to discuss these options and start preparing for your eventual exit. Remember, the goal is not just to exit, but to do so in a way that maximises value for you and ensures the continuity of the business.
To watch the full session, click here. In the session, Kirsty McGregor covers the above as well as the following topics:
- Possible exit routes for business owners
- The process of finding a buyer and negotiating a deal – what regulations do we have to consider?
- How much is the business really worth?
- How to make a real difference - increasing the value of the business and the options available to the owner
- A word about MBOs, MBIs, BIMBOs and MEBOs
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.