Exit of your business without selling it

The process of exiting your business can be achieved in other ways, rather than selling. You do not have to sell your business to be able to move on. There are other options.

Three possible ways to consider are:

Family

Transferring the business to a family member can be an excellent strategy for exiting your business. This allows you the ability to keep the business within the family which still benefits from the company. It also allows the owner to gain some tax advantages by transferring the business interest as a gift during his or her lifetime. I believe that this is the most common way for must small business owners to arrange their exit from the business. It does have drawbacks, such as:

Agreeing share of dividends to family members;
Whether the new people running the business are actually capable
Trouble often arises when the new person wants to do things in a different way to the previous owner;
The “old” owner often has trouble letting go and can interfere;
There may not be anyone who actually WANTS to run the business;
Are you actually selling your business to the family member or part of it, or just handing over control?
You will need to resolve issues of ownership and control.

Become a passive owner

Another alternative to selling your business is to become a passive owner in the business. This is treating your company like any other asset. You may be a share owner in all sorts of companies as part of your investment portfolio or your pension scheme. Treat your own company in exactly the same way. It is a “thing” that you own, which delivers you income. This option allows the owner to continue to take income from the business without needing to spend any time on it. There is one key component of this option and that you have a good management team that can run the business on a day-to-day basis.

The owner can decide not to re-invest back into the business on an ongoing basis, but take out all the cash he can. This provides the owner a relaxed life and a steady income from the business. The drawback of this approach is that money taken out is no longer money in the business”. If you own a business, taking out too much money will hurt your company.

The next level management team capability is usually the single most difficult element to get right. This is regardless of how the owner decides to move on. However if the owner decides to retain ownership then it is crucial that they have someone they can trust to run the business. The other difficulty of course is whether the owner has the ability to stay out of the day-to-day running of the business.

Close down the business

Instead of selling your business you might decide to close it down. This choice is often made when the owner wants to do it quickly. The main down-side is that liquidation often incurs tax penalties provides little in the way of cash to the owner. Though, this exit route offers the owner cash and a speedy end of of the whole process it can be very unpleasant. This is especially true if you have staff. It essentially destroys everything the business owner has built, including relationships, reputation and client lists.

Summary

I have a personal preference for the option of becoming a passive owner. You have spent years creating and growing your business. It is a significant asset so why not view it as one? Hire a good Managing Director and sit back and enjoy the proceeds of your life’s work. If your MD is a good one then it is likely to provide a much better return than any pension you can get these days!

If you think that one of these options for exiting your business might be for you, or if you want to talk through the possibilities, please call or email and we will get straight back to you.