Half of business owners actively considering selling or exiting business
Seven in ten (70%) business owners currently have plans to sell their business according to new research from professional services firm, Mazars.
While for 20% these plans are tentative, half of business owners (50%) are actively considering the future ownership of their business. Recent political instability has prompted this for a third (32%) of business owners, changes in personal circumstances have pushed 32% to consider exiting the business, and retirement planning (30%) is another key driver for contemplating a sale.
The research of 250 business owners also delves into how these business owners plan to exit. Just over two in five (41%) are considering a full or partial sale to private equity, 40% are looking at transitioning ownership to an employee ownership trust and 39% will move the business to a family member.
This desire to keep it in the family is a common thread with over two-thirds (68%) of business owners employing a family member.
However, only a quarter (24%) do this to utilise the family members’ professional skills and instead three in 10 (30%) business owners have succession planning in mind. And for over quarter (27%) the opportunity to make use of personal allowances for tax purposes is the reason.
And this also comes into play in retirement planning. Half (49%) of business owners plan to partially transition their business to their children or grandchildren so they can continue to draw an income through their retirement. 40% will invest the proceeds into their pension, and 39% plan to generate a pot from the business sale that they can then draw an income from. Just 4% of business owners don’t plan to use their business to fund retirement at all.
Paul Joyce, partner at Mazars said: “Deciding exactly when and how to exit a business is primarily driven by two factors, the financial impact, and perhaps more influential, the emotional impact. Running a business is rarely easy, but the last few years have been incredibly challenging, and will undoubtedly have had a knock-on impact on how business owners think and feel about running their business now, and into the future. Finding the right balance between these two factors, especially if different stakeholders have different views, is critical to delivering the right deal.”
“For any business owner, even if exit plans are in their infancy or just on the horizon, early planning is key. Succession plans should be thought out over time and continually updated as personal and economic situations change, especially if the plan is to keep it in the family. There are many things to think about, from the value of the business to the tax implications and from the impact on customers and clients to the impact on staff.”
Paul’s top tips for planning on exiting a business
No such thing as planning to early
There is no time like the present to start planning your exit and indeed it is never too early to start thinking about it. Ensuring you have a smooth transition is one of the most important parts of running a business, don’t let all the hard work that has gone into making the business successful go to waste. Consider the right type of exit, at the right time. The most successful exits are those which are planned well in advance.
Choose the exit that is right for you
There are many different exit strategies that you could choose. From a sale to private equity or indeed a family transition. All come with unique challenges and opportunities to consider. For example, a sale to private equity or trade would likely result in instant liquidity, however a transition to a family member would likely mean a longer time horizon for your money but great continuity. The key is to understand the pros and cons of each option and to choose the one that works best for you and your business.
Get expert advice
If in any doubt on what is best for you, your business or your family, speak to an expert who can help develop a plan that works to achieve your goals.
