Planning to sell or walk away from a business comes around for all business owners at some point.
Whether you’ve spent time building a successful business from the ground up or simply fancy a new venture, planning is essential.
Spending time to prepare a well-executed departure can increase the value of your business, while ensuring it thrives after you leave.
Your books should be accurate and up-to-date, while your processes should be documented to ensure your business is in the best possible shape to hand over.
It often takes years to keep on top of all this and it’s never too soon to start. But what options do you have and how soon should you start planning?
Succession planning
Other than liquidating a failing business, the most common ‘out’ for a business owner is to hand over the reins to an experienced successor.
You could pass the business on to a family member, to another senior colleague in the business, or to an external successor.
If you’re promoting from within, you could allocate time to mentor a family member or senior colleague to ensure they are ready to take on the day-to-day running.
Alternatively, you could go out and headhunt an external successor, although waiting for the perfect candidate to become available will take time.
Selling up
We recommend you give serious consideration to the following steps to ensure the baton is passed on smoothly to your successor.
The first rule is to get your records in order, especially if you are selling your business to the highest bidder or merging with another company.
These should include at least two years of accurate financial records, so make sure your books are clean.
This will paint a clear picture of your cashflow, your internal processes, and how the business operates under your watch.
Make everything transparent and fair if you are passing the business over to a family member and wish to avoid conflict with your nearest and dearest.
If selling to staff, be prepared to accept an initial deposit followed by staggered payments – often from income the business makes after its sale.
Allow enough time
Time is of the essence when it comes to exiting your business – the more time you have, the smoother it usually is – and vice versa.
If you have a lot of time and want to promote from within, give staff the authority and training they need to develop and eventually succeed.
This will enable you to delegate certain responsibilities and take a step back, perhaps with retirement in mind.
Get in touch
It’s never too soon to build a strategy to exit your business. To find out more, call 01454 619900 or email us at advice@dunkleys.accountants