Why don’t business owners plan for their exit?

Why don’t business owners plan for their exit?

Why don’t business owners plan for their exit?

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It is odd, we all know that the time will come eventually, when we need to move on to do something else. This could be retire and indulge in our hobbies or other interest or to just cut back on the time we spend running the business, but we are all reluctant to face up to it or plan for that day.


Some people will be in the fortunate position that their mortgage has been paid off, they have some savings and a sufficient pension to support the lifestyle they wish to have after leaving the business but have we thought about how much we do need to support such a lifestyle? Where is the money coming from? We are all living longer and are capable of being active for far longer than before.

There is also the question of how are you going to leave the business? Pack up and walk away is an option but what about any employees? Of course you could make them redundant and leave them to seek other opportunities. There is a cost to you of that of course. If your company is solvent them you have the option of a voluntary winding up petition but it is not so straightforward.

You may think, well, I’ll just sell it on when it becomes too much for me or I lose the drive to carry on. But sell to whom? Where are these buyers coming from? Is your business in the best shape? Are you prepared for a sale? Remember that running a business is not the same as have it in a position to sell it. Buyers like to see a profit and one that will continue into the future. They want a good balance sheet so they do not find they buy the business and do have have the cash to settle the short term liabilities.

Any seller should consider his or her tax position in advance. I have seen too many people fail to do so and get hit with a 20% Capital Gains Tax bill when, with a bit of planning, they could reduce this to 10% or less.

Leave it too late and you will have a distressed sale and the buyer will take advantage with a low offer. A lot a sales fail at the due diligence stage because the seller was unprepared, its books were not in order, it does not have written contracts with suppliers and/or customers meaning the buyer does not have any security that the contracts will continue.

So many times in the past I have seen the look on the face of a seller at the completion meeting. They look shell shocked, it should be a joyous occasion when they look forward to their future life but they have not considered what they are going to do next and not planned properly. They have doubts. Have I done the right thing? Will I be able to live the life I want to?

I am sure that to some extent or other, all business owners plan for the development of their business but seem to fear planning for their exit. As a result it has been shown that they get less for the business than they deserve. After all those years of blood sweat and tears, why not get the best you can for it so you can enjoy the future?

If you are interested in planning for your future, give me a call on 01291 430 124 or 07855 49 5509, or email at bobjones@pinstripelegal.co.uk.

About the author:

Bob has spent many years working in commercial law, managing the claims and legal teams.

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Pinstripe Legal Services specialises in meeting all the commercial needs of your business efficiently thereby protecting you and improving your cost effectiveness and profitability.

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