Business Exit Strategy

[Phil.]

Hi all,

Has anyone got involved business exit strategies? I'd love to hear anyones experiences and advice?

We're in our 4th year of trading and things are going really well. Last calendar year we doubled sales YoY and this year expect to break the seven figure mark. Whilst this years growth will slow we are still growing and forecast this to continue in the future.

Covid19 has provided a much needed opportunity to pull my head out of day to day responsibilities and look ahead for the future. I'd like to look at future exit options, it's not something we're ever really considered, but it is something I'd like to plan for.

As I see it we have two options...

1. Take a reduced role (not even sure we'd want that), would be nice to step away from some of the day to day activities. Keep a salary and divs moving forward.

2. Sell the business.

Option 1 is straight forward, we'd still have to consider the most tax efficient way to extract money from the business which seems logical to keep doing what we're doing.

Option 2 is obviously more of a minefield. If we were in a position to sell we could potentially secure our financial freedom for the future, that would be a huge relief. conversely, we wouldn't want to sell too early, we're in a niche industry and leaders in the UK, we still see a lot opportunity.

The most obvious exit would either be to sell the company but this would obviously bring large tax implications, might entrepreneurs relief be an option? Seems like every individual is applicable for 1 million relief with capitol gains at 10% which might work out better than option 1 if we were to keep money in the business and withdraw via a combination of paye and divs?

Any other avenues to explore? Thanks for taking the time to read.

P

 

[dotcomdude]

If the next few years still look rosy (growth-wise), it makes more sense to sell the business just before the peak - so I'd consider running it maybe with a manager until then.

 

[Clinton]

Has anyone got involved business exit strategies? I'd love to hear anyones experiences and advice?

Advice 1: Don't use a question mark at the end of a statement.
Advice 2: This is a far more complicated a matter than you seem to appreciate. It's not best suited to a forum discussion. Go pay someone to advise you on this instead of trying to do it on the cheap!

If we were in a position to sell we could potentially secure our financial freedom for the future...

I think you're going to be very disappointed. Set your expectation at 1x the net after tax profit declared in your last accounts! Unless you've spoken with a business broker, of course. Many of them will give any number plucked out of thin air - £1m, £2m whatever.

 

[Rawlinson Pryde]

In your valuation when looking at profits you need to factor in a realistic salary if someone were to be managing the business for an investor.

Lots of business owners see a £100k profit say with a £8k salary, but when it turns out the true salary for someone to run a business is more like £50k with NI on top, your profits almost halve.

As mentioned above you want to seek proper advice to work towards your goal.

 

[MOIC]

Advice 2: This is a far more complicated a matter than you seem to appreciate. It's not best suited to a forum discussion. Go pay someone to advise you on this instead of trying to do it on the cheap!

This.