Ready to sell your business? Here are three exit strategies to consider

If you are a business owner and are looking to sell, or simply want to be prepared for when you do, you will need to create a strategic plan that will help you successfully sell or share your business when the time comes.

Here are three common, but important, exit strategies to consider that will ensure you make the right decision when the time is right for your business.

Merger and Acquisition (M&A)

Choosing this strategy as part of your business plan will mean your business is either purchased by, or merges with, a business that has similar goals to yours.

It is very good when bordering companies have comparable skills, as you know your business will be left in the best hands whilst also saving you resources when the two entities are combined.

If your business is bigger than an SME, this strategy is a more efficient way to grow your revenue than creating new products organically.

The main benefit to consider when using this strategy is that your business will get valued on a much larger scale.

You will become the ultimate product/service provider to any buyer by fulfilling their immediate needs.

As you are selling the business, you also have the opportunity to negotiate a higher price, potentially resulting in higher profits.

Sell to a new owner

Unlike M&A, selling ownership means you do not combine businesses.

Instead, it means you give up the rights to your business and could sell your business for a higher price than it is worth, especially if you sell to a competitor.

Selling to a new owner allows you to remain in the business depending on your stake and interest level.

Familiarity with the buyer also decreases the risk of disruption to the business, for example if the buyer who you well or if they are already familiar with the business.

Management buyouts (MBOs)

An MBO is a financial transaction where someone from your business’s management team can purchases it you.

Any management member who executes an MBO will purchase everything associated with your business.

This strategy is great due to its potential rewards and control from being owners of the business rather than employees.

Although this strategy can be risky and may not work, it will help to streamline your operations improve profitability as you will be making your business private rather than public.

It might also be called a leveraged management buyout (LBO) as it uses a large amount of borrowed capital – this is crucial to take into consideration if you wish to use this strategy.

The overall key to any successful exit is setting time aside to plan accordingly.

Having a substantial plan in place before you sell your business is essential, but you should also ensure you plan your tax efficiently too.

If you are struggling, our experts will help you to plan your tax as part of your exit plan before, or during, the sale of your business.

To discuss more about exit strategies and how to pick the best one for your business, please get in touch with the team at Iceberg Accounting.