An exit strategy is a plan for what will happen when the day comes that you want to leave your business. There are various different types of exit strategy:
Sell your business to a larger company or to one of your competitors.
Sell to a private equity firm or other investor.
Pass it on to a family member or sell your stake and let one of your business partners take over.
Arrange for your employees or managers to buy you out.
Simply close the doors and sell off the assets (Liquidation).
In order to determine the best option for you, firstly you need to define your exit goals. Do you want to stay involved in the business and retain some control over its future direction, or do you want to maximise your financial gain?
Making a plan
Once you’ve decided on an option, you’ll want to make a detailed plan. How will the transition take place? What steps will be involved?
The first thing to do is value the company. This is particularly important to know in the event of a sale, but it’s also relevant if you’re passing the business on to a family member or business partner. You’ll need to know its value in order to calculate the tax implications.
Many business owners don’t accurately value their own business. Often they take advice from friends at the gym or golf club rather than professionals. Getting a professional business valuation ensures the business is not over or undervalued and can help you the best possible price.
How do I pay less tax on exit?
When you sell or exit you could be landed with some heavy tax liabilities unless you’ve done your tax planning properly. This planning should be done prior to the actual sale to ensure any sale is structured in the most tax efficient way.