“Failing to plan is planning to fail” - Put your succession plan and exit strategy in place today and minimise your risk
As a business owner, you will spend years developing your business. From concept and your first ever business plan, through to applying for investment and forecasting your business takes on a life of its own. You nurture its growth and provide for it as much as it may provide for you, investing not only money but also time in its future. After years of dedication and hard work, the time comes where you want to take a step back and enjoy the fruits of your labour. This is a natural progression for a successful business however; failing to plan properly for your exit can have detrimental effects not only for your business but also on you personally. As Benjamin Franklin once said, “failing to plan is planning to fail”.
What is succession planning?
The question is not so much as ‘what is succession planning?’, but what happens to your business when you are ready to move on? You need an exit strategy. Now you could simply pay off your creditors and wind up your Company. However, in doing so not only do you deprive yourself from maximising the value in your business but also you would have spent years cultivating your business; for what? Whatever your industry, your business provides for not only your customers but also your suppliers and employees. The majority of the time, simply winding up is the least commercial option for all parties.
What are your options?
Your exit could take many different forms, from a management buy-out, sale to a third party or even sale to a competitor. No two exits are the same. Whatever shape your departure takes, it is fundamental that you make sure its terms are right for you. Will you receive cash up front or will payment be deferred? Will you stay-on post-completion to support the new owners? Will your consideration be dependent upon hitting certain targets? These are but a few key aspects to consider when planning your exit.
What are your liabilities?
Exits are personal. When operating a company there is a certain ease in the knowledge that provided your decisions are in the company’s best commercial interests your personal liability is limited. When you sell your shares however, you will become personally exposed. Not only will there be personal tax implications for you but also your buyer will require warranties of you. This is why it is so prudent to prepare for your exit. Seek tax advice. Ask your accountant to analyse your accounts. Review your contracts, practices and policies. Doing so will give you the chance to address any concerns in advance and structure the transaction to suit you. Neglecting to do so could result in you giving onerous indemnities, facing a breach of warranty claim post-completion or even having your purchase price reduced.
Working with a strong corporate finance, tax and legal team who can properly devise an exit that works for you, you will minimise your exposure and maximise the gain from your exit.
For help and advice on preparing a succession plan and exit strategy please contact Holly Threlfall, Corporate Solicitor at Franklins Solicitors LLP. Holly has a wealth of experience in all areas of corporate law, with particular interest and experience in succession planning and exit strategies. Contact Holly Threlfall on 01604 828282 or email firstname.lastname@example.org.