Selling up and settling down: Preparing your business and employees

14 September 2023

It’s often said that if you fail to plan, you plan to fail. And that rings true for owner-managers looking for a strategic business exit. Although retirement may seem like a long way off for some, the earlier you plan the better. But how early are we talking, and what should you be planning for?

Matthew Barton discusses the internal factors you should consider in your contingency planning to prepare for selling up and settling down.

Exiting a business can be a deeply personal decision. As an owner-manager, you will know your business inside and out. However, when it comes to planning your exit, there may be elements of surprise from an internal perspective if you fail to plan ahead. From unresolved issues uncovered in the due diligence process to shareholder disputes, each problem can be resolved with the right planning and foresight.

So, when it comes to exit planning, it’s important to not only have a plan A, but to also plan for things that may not go your way initially. Whether you’re looking to sell up and settle down in the next few years, or it’s a distant ambition- a proactive consideration of your goals, your business structure and your people will set you in good stead for tackling whatever the sale process has in store.


What could impact your goals?

Firstly, revisit where you want your business to be before you exit, and what you personally want to get out of the business upon your exit. What internal and external factors could potentially impact upon achieving these goals?

Asking these questions and reviewing your goals will help you to prepare a contingency plan for various scenarios, to mitigate the need for fire-fighting and having your plans derailed if an unexpected scenario plays out. It can also help you make clear and well-informed decisions for the future.

Are the people in your business ready?

Creating and maintaining the culture within an organisation is usually one of the top priorities of owner managers today. The key to this is the people within your business.

Inevitably your exit will have an impact upon them. Prepare for the questions which will come your way from your team. This will also give you the chance to put any actions in place which are necessary ahead of the questions being asked and ahead of the sale.

If you have a team of trusted managers, you may be working towards a management buyout (MBO) as your exit route. You need to assess how your current management teams’ abilities, needs and expertise align to your own retirement goals. If you don’t have the expertise and skills in-house to step into your role as owner, you may need to start recruiting, upskilling or mentoring.

Additionally, you need to think about how your team is going to fund the buyout. Do they have the means financially? Otherwise, you could find yourself relying on external loans. And if the deal falls through at the last hurdle, it could then impact on your relationships with your current management team.

Shareholder agreements

If you run a limited company, it’s important that your shareholders know their rights during each decision that is made, especially one as important as a potential sale of the business. Shareholder agreements clearly define the rights of shareholders. Without an agreement, decision making could become drawn-out and difficult.

If you have an exit strategy in mind, this should be clearly communicated to all of your stakeholders when the time is right. Providing clear information and transparency behind major changes can help ease anxiety amongst your employees and shareholders. Shareholders should know their rights regarding the decision making process via a shareholder agreement to avoid disputes.


Have you considered the impact of keeping it in the family?

If you want to pass your business to the next generation and create a legacy, family based succession may be for you. Although it can be tricky, striking a balance between sentiment and strategy is key.

Whilst offering another route in protecting your legacy, family based succession can make the business sale process smoother as you leave your business in trusted hands. As there’s a likelihood that your family has worked in your business, clients and customers can continue receiving the same level of service they always have.

However, considering your family’s skill set and business acumen is a must. You need to be confident that they have the ability to continue your business’ success, not only for your legacy but also for the financial ties to the Company's performance. And when it comes to dedication, it’s vital to consider a possible fraying tie to the business over the course of future generations. It could mean that the business is sold to a third party eventually.


How can tidying up help you prepare?

Detailing and evidencing your trading, valuation and overall running of your business is vital to any exit strategy. However, you shouldn’t leave this to the last few years before your exit.

When it comes to staying ahead and planning for the unknown, information is key. Sufficient management information should cover every aspect of your business, allowing you to spot any inconsistencies and resolve them quickly. Good information management can help with cashflow planning and forecasting, allowing you to strategise and make effective decisions.

Tidying up your documentation should cover everything from employee contracts to lease agreements and software licenses. You’ll also need a full record of your VAT history, payroll taxes, corporation tax payments and any international tax considerations. These will demonstrate your compliance and even help you improve your business’ tax efficiency.



Helping you plan for the future

The right time to plan for the future is now.  Succession planning and planning for the unknown go hand in hand as you strategise and work towards a goal whilst preparing for the unknown. Our team of tax advisors and accountants are on hand to guide and advise you through each step.