Business Tips: Set Goals for a Business Exit
Every business has a finite lifespan. Some may last for decades, and others may only last a few years. As a business owner, your business’s life is likely to be strongly aligned with your own life goals and personal plans for the future.
When it comes time to sell up, it’s important to know your goals 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
When planning an exit, you need to think carefully about WHY you’re selling up and WHAT you want to achieve. This is a massive change in your life, your business career, and the fortunes of your company and employees.
Ask yourself what your actual goals are from this exit:
- Do you want to retire, ease the pressure and enjoy some freedom?
- Has this business journey ended, 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 challenging to predict, but you have several options regarding 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 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 for you, so you must clearly understand 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 required 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 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’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 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.
Talk to your accountant, tax agent, and other business advisers and run your exit goals past them. As a founder, being objective about your business can be difficult. 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.
Please get in touch if you’re thinking about selling up and moving on. We can give you the necessary advice and set you on track for a successful and profitable sale.