Whether you’ve built your company from scratch or transformed an existing business, the way you navigate your departure not only impacts your personal wealth but also your legacy. Therefore, it’s critical that you put together a comprehensive strategy exploring each stage of your business exit. This includes detailed planning beforehand, the execution of the sale itself, and how you manage your legacy afterwards.
Before exit – strategic planning
To put it simply, a successful business exit only works thanks to the strategic planning put in place long before any discussions with potential buyers. Ideally, you should be looking at a preparation phase of about two to five years before you plan to leave your business. This will enable you to focus on optimising your business to increase its value.
Establish clear objectives
What does success look like for you? It’s imperative you know this before you start your business exit strategy. Begin by defining what success looks like for you. Is your priority maximising financial return, ensuring business continuity, or preserving your company culture? Knowing what your personal goals are will guide every subsequent decision and help measure the success of your exit.
Assemble your advisory team
Just like building your business, navigating an exit shouldn’t be a solo effort. Put together an advisory team you trust and ensure it includes:
- an accountant familiar with the tax implications of business sales
- a financial adviser to work with you on pre- and post-exit wealth planning
- a solicitor with mergers and acquisitions (M&A) experience
- a business broker or M&A adviser who understands your industry
Enhance business value
Increasing the value of your business will make it more attractive to potential buyers. Making changes such as resolving any outstanding legal or regulatory issues, updating your processes and systems, or strengthening your management team can demonstrate that you are consistently growing and therefore increasing profits.
Consider exit options
What do you want for your business once it’s been sold? This is an important decision that will form the basis of your exit strategy. It could be something as simple as a management buyout, private equity investment, selling to a strategic buyer or family succession.
Prepare for due diligence
Your business will be thoroughly scrutinised, so it’s important you conduct your own internal due diligence. Clean financial records, well-documented contracts, protected intellectual property, and compliant regulatory status will prevent unwelcome surprises during the sale process.
During the exit – executing the sale
When you transition from preparation to active selling, focus shifts to managing the complex transaction process while maintaining business performance.
Maintain confidentiality
When looking at selling your business, it’s easy to want to discuss it with anyone who asks. However, it’s always best to reduce the number of people who know about the potential sale until the appropriate time. Making any announcement too early could unsettle not just your employees but your suppliers and customers too, potentially damaging the value of your business.
Develop compelling marketing materials
Work with your advisers to put together a thorough information memorandum that shows off your business in a proper but appealing way. Make sure to spotlight what makes your business strong and where it could grow, while also tackling any worries investors might have.
Identify qualified buyers
Whether through direct approaches or through intermediaries, focus on finding buyers who not only have the financial capability but also strategic alignment with your business vision and values.
Negotiate effectively
It isn’t just the price you should be negotiating. Look at what matters to you and negotiate appropriate terms. These could be areas such as:
- employee retention
- payment structure
- earn-out provisions
- representations and warranties
- non-compete clauses
- your ongoing role (if any)
Manage due diligence
The due diligence process can be exhausting and intrusive, so prepare your team to respond efficiently to information requests while maintaining day-to-day operations.
Maintain business performance
Perhaps the most challenging aspect of the sale process is to keep the business performing strongly. Buyers will be watching current performance closely, and any decline could impact valuation or deal terms.
After the exit – managing your legacy
Once the sale completes, your focus will move to your personal transition and ensuring the legacy you’ve created endures.
What’s next?
For many successful entrepreneurs, selling a business is not the end of their professional journey but the beginning of a new phase. Whether that’s starting another company, investing in others’ ventures, or enjoying your retirement, approach this chapter with the same energy and vision that built your business.
Financial planning
Quite possibly one of the main aspects of business exit planning is to work with financial advisers to not only develop an investment strategy for the sale proceeds but to also implement tax-efficient structures. Reassess your financial goals so you can either start work on your next venture – or even plan for retirement.
Building your legacy
You’ve spent a lifetime building your business, now it’s time to look at your legacy. While you may not want to have the trappings of your business, you may want to use your experience to mentor other entrepreneurs, become an angel investor, join boards or start philanthropic activities.
Personal transition
Many business owners underestimate the emotional impact of selling their company. You could combat this by exploring new challenges or interests, establish a new daily routine, complete that home improvement project or travel to those countries that have always been on your ‘when I have time’ list.
Final thoughts
A business exit represents both an ending and a beginning. Approach each phase mentioned above thoughtfully, look at what you want for the future while protecting the past. By starting your business exit planning early, you can achieve not just financial success but also personal fulfilment and lasting impact.
A successful business exit isn’t just financial, it’s the lasting legacy on not just you but those involved in the business. We can’t wait to see what you do next!
Content correct at the time of writing.
This article has been produced for information purposes only. It is not intended to be an invitation to buy or act upon the comments made. All investment decisions should be taken with advice, given appropriate knowledge of the investor’s circumstances and one must satisfy certain investor criteria before being considered eligible to invest. Any forward-looking statements and forecasted returns represent the current views of Mattioli Woods Limited and may be subject to change. Your capital may be at risk and past performance is not a guide to future returns. Mattioli Woods Limited is authorised and regulated by the Financial Conduct Authority.
