How to prepare a business exit strategy

5 steps to a successful exit with a profit

Just like death and taxes, exiting your business is inevitable. But it’s not a given that you will exit your business with a profit. Start planning now to ensure you’re rewarded when it’s time to move on.

Types of exit strategies

How you exit your business depends on your circumstances, business structure and end goal. The earlier you start planning your exit, the better the outcome.

Selling

The most lucrative exit strategy, selling your business can be the most complicated. There are multiple ways to sell, including:

• to a business partner or key stakeholder
• to your management team or employees
• to another company as part of a merger or acquisition
• via acquihire (where a company is bought solely to acquire its talent)
• by Initial Public Offering (IPO) (where you sell your stake to shareholders).

Succession

Passing on the business to a designated successor – whether the next generation of family or a loyal employee – secures your long-term legacy. It can minimise disruption but can also strain relationships.

Closing down

For small business owners and sole traders, deciding to cease trading may be the most realistic exit strategy, especially when:

• the business has been built around you
• market conditions have changed
• the business is no longer profitable.

Insolvency

Without proper planning, insolvency is a genuine risk for business owners. AFSA recorded 9,930 personal insolvencies in 2022/2023 – a 4% increase on the previous year. This resulted in either:

• liquidation (the process of converting business assets to cash to repay debts); or      
• bankruptcy (the legal process declaring that you cannot pay your debts).

How to prepare a comprehensive exit plan with your accountant

Planning a successful business exit takes time and expertise. Your accountant will guide you through 5 key steps to ensure you cover all bases and secure the best possible outcome.

Step 1: Know your goals

Identify your goals to get on the right path and increase your chances of a successful exit. Your goals may include:

• maximising the financial return on your investment
• ensuring job security for your employees
• maintaining a legacy within your industry
• having a clean break from the business
• continuing to play a role following the transition.

Aligning your personal and business objectives is key. Your accountant can help define your objectives, prioritise your goals and create a roadmap to follow.

Step 2: Develop an exit strategy to maximise value

With your goals all set, your accountant can recommend a targeted strategy to maximise the value of your business, taking into account

• the financial health of your business
• its market value
• opportunities for improvement
• the best approach to achieve maximum value.

Working together, you can enhance the worth of your business and boost your bottom line to make it more appealing to potential buyers or successors.

Step 3: Maintain the right corporate structure and quality reporting

Your accountant will provide advice on how to structure your business and implement detailed reporting to make your business more attractive to buyers while optimising:

• tax implications
• regulatory compliance
• financial reporting
• due diligence requirements.

Expert advice and quality reporting build investor and buyer confidence and simplify the transition process, paving the way for your successful exit.

Step 4: Prepare legally binding sales arrangements

Your accountant will also work with your solicitor to protect your interests and facilitate a smooth exit by having legally binding sales arrangements in place, covering:

• copyright and trademark registration
• domain name registration
• leases for business premises
• employment agreements
• confidentiality agreements
• health and safety regulations.

Enlisting professional advice at this stage ensures you’re in the best possible position when it comes time to negotiate the terms of sale or succession.

Step 5: Align your business and personal finances

Your accountant will help align your business and personal finances before, during and after your exit to maximise ROI and secure your future, with a focus on

• wealth planning
• estate planning
• asset protection
• tax optimisation
• retirement planning.

With your personal and business finances aligned, you can move into the next phase of your life, confident in your long-term financial security.

Take action now to maximise your return on investment

Partnering with an experienced business accountant puts you in the box seat, giving you the professional advice you need to make the best possible exit from your business.

Safeguard your wealth and future success with expert accounting advice.

Ask for a callback from O'Bryan and O'Donnell.