When it comes time to look at how and when you might retire and step down from your business, there’s a lot to consider. And you’ll likely have a lot of scenarios and questions playing out in your mind. How can I work less and enjoy more life? How do you retire if you’re a company owner? How do you approach an exit? When is the best time to start planning your retirement and business exit? Here we will cover some of the key questions and help you start to formulate a plan.
Succession Planning: What are My Exit Options?
The reality is that every business owner will exit their business one day. The question really is when and will it be on their terms. Here we look at the different options.
Many businesses get to a stage and then gradually fade away and the value of the business gradually reduces to potentially zero as shown below.
A popular option is to step up the business, making it more attractive to a potential purchaser. In simple terms your business’ value is the profit multiplied by a multiple.
Value = Profit x Multiplier
Increase the profit and increase the multiplier and your business will be worth more to a buyer.
We cover this approach in other articles and also in the free book you can get from our website.
Succession Plus is a selected 55/Redefined partner offering strategic advice for SME owners who want to consider or manage succession and exit planning. Whether you want to run your business on a part-time basis or plan to move away completely, you can take advantage of expert advice. Contact a Business Planner at Succession Plus today.
The third way of exiting your business is to step down; that is step down ownership, control and involvement over a period of time; no sudden shocks to business. This can deliver several advantages:
- Personal financial security.
- Tax benefits.
- The ability to leave a legacy.
- Potentially handing over the business to family members.
- Potentially helping your staff, many of which may be friends, take over the business.
The methods to achieve this a varied and include employee ownership, management buyouts and vendor-initiated management buyouts. That may all sound a bit daunting, but they are controlled ways for you to extract the value of your life’s work over a period of time and would allow you, if you so choose, to carry on working with your business on a reduced basis as a new team takes the reigns.
Retirement doesn’t have to be a big-bang event. You have choices. The earlier you consider what you want to achieve, the better the outcome will be for you.
By Kevin Harrington, Partner, Succession Plus UK