Exit Strategies for Small Business

The thought of handing over a business that has cost you blood, sweat and tears to build may be tricky to grasp, but it is a fundamental part of the long-term strategy that should underpin your business plan. In this blog we discuss the pros and cons of three exit strategies for SME business owners.

First things first, do you need an exit strategy? If you are the owner of a business, then the answer you are looking for is yes. Keep reading. Eventually, you will be unable to run your business, so it is a good idea to plan for the future and figure out if you will sell, close, or transfer ownership in advance.

Family Takeover

There are about 3 million family businesses in the UK, and almost half of UK SMEs hope to pass their business onto the next generation. The hope tends to be that your legacy will live on, and the business will provide a living for your successors. However, this can be a risky strategy, only 30% of firms are able to survive as a second-generation business, and just 10% as a third generation one. Ultimately, skills outweigh familiarity.

Pros:

  • You can keep an eye on what is going on within the business, perhaps in an advisory capacity.
  • If you have a family member who is willing to take on the business, you are able to train them alongside you so that they are prepared when it comes to the transition.

Cons:

  • Heirs to your business need to have the necessary skills to be successful. Bloodline is not enough alone, a degree of business acumen is essential.
  • Succession could cause divides and conflict within the family, making the development of a family succession plan potentially difficult.

Sale

Whilst there are several options for selling your business, the most popular for SME’s is selling in the open market. If you take this route, then whenever you are ready to sell, you put your business up for sale at the desired price and if all goes to plan, walk away with what you hoped for.

Pros:

  • It is possible that the buyers of your business will ask you to stay on as an advisor, meaning you are able to maintain a degree of involvement with the business you worked hard to create.
  • You are able to take advantage of opportunities. You could choose to sell your business at a strategic time in terms of the economy and trends in your industry in order to attain the best possible price.

Cons:

  • The process of selling can be lengthy and complex. You will have to go through a series of negotiations to achieve the final transaction.
  • The buyers may require you to sign a non-compete agreement. This means your ability to start another business within an agreed timeframe or consult with similar businesses could be restricted.

SUBSCRIBE TO OUR

NEWSLETTER

fabulous group