Preparing your exit strategy

November 5th, 2018

With any business, forward planning is key to success. And although it might not be a top priority, considering what will happen when you leave the business should form part of your overall plan. You’ve worked hard to build your company to what it is today, so when it comes to your exit strategy, it shouldn’t be an afterthought.

At Champion, we specialise in supporting SMEs from start-up to sale, advising on everything from incorporation, acquisitions, investment and succession planning. Our role isn’t to tell you what to do with your business, but to provide you with the different strategies available and the tax implications of each.

For example, before you leave the business, one option worth considering might be to give your senior management team the opportunity to acquire shares in the company.

Our Preston Office recently helped a client restructure their business shareholding, in preparation for the owners’ eventual exit. In this scenario shares were offered to the senior managers together with the opportunity to purchase more share capital in the future. The eventual aim being that the management team are in a good position to buy out the current owners over the coming years.

Not only does this strategy give an incentive for the managers to drive forward the growth of the business, it also serves to lock in talent who can take the company forward through its next phase of ownership.

A second example of a ‘typical’ exit strategy might be the exit of a senior family shareholder from the business. It will often be the case that the remaining family shareholders can’t necessarily meet the value required to buy the retiring member out. In this instance, an effective strategy is a ‘company purchase of own shares’, where the company (subject to being able to meet certain legislative conditions) effectively buys the exiting person’s shareholding. This is a preferred route for the shareholders, since finding the buyout funding out of personal income can be costly. If structured correctly, the exiting shareholder may be able to treat the disposal of his shares as a Capital Gain and reap the benefits of Entrepreneurs relief.

Client manager, Jonathan Robinson, comments: “We often work with several generations of a family business, so it’s a privilege to be able to work on a long-term plan which helps owners achieve their goals, not only in their business life, but also when it comes to taking a step back and enjoying retirement. With careful planning and support, you can ensure your exit from the business is smooth, and that any changes are beneficial for all involved. It is never too soon to start thinking about this.”

To discuss your exit strategy, get in touch with your local Champion Office.

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